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Can I ask my lender to lower my rate?

If you regularly compare your home loan interest rate to what’s out there on the market, you may come across better deals. Over the past couple of years, interest rates have fallen significantly, meaning that you could be paying more interest than you have to. Those on older loans who haven’t refinanced recently are more likely to be overpaying in interest.

Getting an interest rate reduction could help you save thousands of dollars in interest on your mortgage repayments in the long run.

Compare your interest rate with the rates your lender is offering new customers

Before you approach your lender to ask for a lower interest rate, it’s a great idea to do some prior research. Here’s what to do:

  1. Head to your bank’s website and find their new interest rates and compare with your interest rate
  2. Remember to take into account the different ways interest rates are charged. While home loans with variable interest rates will typically have lower interest rates, fixed rate home loans afford more stability but at a higher interest rate.
  3. Consider what would be best for your lifestyle. The good thing about variable rate home loans is that you have more flexibility when it comes to refinancing in the future, making extra repayments and having access to a wider range of loan features (e.g. offset accounts and redraw facilities).
  4. Remember that fixed rate home loans still allow you to make extra repayments, but they’ll be capped at a specific amount and fees can accumulate if you exceed this amount. If you like to know exactly how much you’ll be paying per month, a fixed rate loan is a good option because it isn’t subject to fluctuating interest rates.

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Is a 1% interest rate reduction worth it?

A 1% interest rate reduction can absolutely be worth it. Since most home loans are long term loans that last generally between 20 and 30 years, interest savings add up. Take a look at the table below to see how much a 0.5% and 1% interest rate can save you.

A $200 saving per month may seem insignificant, but that’s $2,400 in your pocket every year or $12,000 over 5 years!

Loan amountInterest rateLoan termMonthly loan repayment
$500,0003%30 years$2,108
$500,0003%30 years$1,976
$500,0003%30 years$1,848

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Check if you’re paying loyalty tax

It’s important not to assume that because you’ve stuck with a lender for a number of years that they will automatically reward you for your loyalty. In fact, many homeowners may be subject to a ‘loyalty tax’. This is where banks continue to charge existing customers high interest rates while offering low interest rates to new customers.

Despite the low RBA cash rate, lenders often don’t pass on rate cuts to existing customers. Just because your interest rate was good at the time you received your loan, doesn’t mean it is still competitive to this day.

Therefore, motivated homeowners would benefit from being assertive and requesting the same low interest rate that new customers get.

How to negotiate a lower interest rate

  1. Research and make sure that the rates new customers are getting are lower than your current rate. Look beyond the interest rate and check out the loan terms and features that are important to you.
  2. Don’t just focus on your lender — compare interest rates and home loan deals across the whole market.
  3. Take note of your current home loan product information, including the interest rate, loan balance, repayment amount and other details.
  4. Have examples written down and ready to bring up during the call or meeting.
  5. Explain that you aren’t afraid to take your business elsewhere. Lenders are competing with each other for customers, so they may be more willing to lower your rate if you are considering switching.
  6. Make sure if you are offered a better deal that they send it through to you in email or writing ASAP.
  7. Seriously — don’t be afraid to consider switching to another lender if your current bank won’t budge.

Negotiating a lower rate isn’t for everyone. If you aren’t confident in doing so, a mortgage broker can negotiate on your behalf.

How much can you save by refinancing?

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What will increase the chances of my lender lowering my rate?

One of the reasons why a lender will charge a customer a higher rate is because that customer is deemed as high risk. So, you need to present yourself as the low risk, ideal borrower.

You can do this by:

  • Having a history of making principal and interest mortgage repayments on time
  • Your credit score is healthy
  • Being in a good financial situation (i.e. stable income and career, limited expenses)

Lendi can help you compare your interest rate within seconds. See how much you could save here.

What if I don’t feel comfortable asking my lender for a lower interest rate?

That’s not a problem. Lendi’s Home Loan Specialists are more than happy to negotiate on your behalf to ensure that you get an interest rate that is more competitive. Choose a time to chat with our experts here.

We can conduct a Same Lender Review to assess what your options are with your existing lender and whether it makes sense to stay or move on to a new lender.

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Should you switch mortgage lenders?

You don’t have to limit yourself to a single lender for the entire course of your home loan. If you can see other lenders offering better rates, refinancing could save you thousands. Lendi can help you make the switch and our Home Loan Specialists can offer you free expert advice.

If you are on a fixed rate loan, understand that refinancing before your fixed rate period is over could result in break costs and exit fees. Before you make the switch, ensure that the benefits of refinancing outweigh any costs associated. Fixed rate periods are usually only between 1-5 years, so sometimes it can make more sense to wait.

Got a home loan question? Just ask!

We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: interest rate, refinance, home loan, lender, co operative lender, variable interest, fixed interest

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. Lendi's board is majority independent and non-executive.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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