One of the most annoying things in life is that the best rates get offered to brand new customers and loyal customers end up paying more. Insurance, phone, utilities and banks – we see it all the time. Painful as it may be, it pays to shop around. Right now our sense is that the big pay-off is with the banks.
Seismic changes in interest rates, bank funding costs, competition and mortgage demand under COVID-19 have meant that highly attractive terms are being offered to new borrowers. In particular, the Reserve Bank of Australia (the banker to the retail banks) has extended borrowing incentives to retail banks and is holding official interest rates to 0.25% for overnight cash and all lending terms out to 3 years. This means that most one, two and three year fixed rates are SIGNIFICANTLY LOWER than variable rates. Many banks have repriced for risk as well – so if you have plenty of equity in your home (such as a loan to valuation ratio under 60 or 70%), a sharper rate could be waiting for you too.
Banks are not obliged to switch existing borrowers to a new deal but, when pushed, may offer a match to new lending terms to prevent a refinance with another bank.
To give you an example, a Sovereign client recently saved 0.25% on a $1.5m loan through renegotiation AND a further 0.3% through fixing part of their loan. The saving was around $7,000 per annum on a loan that had actually been refinanced to a market leading rate less than a year ago!
So if you’re a borrower look up your current rate and compare with where we think the market is now:
Contact us if you would like help. Banks vary enormously in their service, packages, application turnarounds and ease to deal with. We can refer you on to an independent mortgage broker who knows their way around the system and, if necessary help with a quick and relatively painless refinancing.
Disclosure Statement: This communication has been approved and issued by Sovereign Wealth Partners Pty Ltd ABN 18 607 071 367 Corporate Authorised Representative (No. 001233909) of Sovereign Capital Pty Ltd ABN 44 164 127 833, AFSL 456235.
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