For years now, lenders have been employing sneaky tactics to help prevent you from getting lower home loan interest rates.
Many of you are paying $50-$100 per week more than you need to. That adds up to a LOT over 30 years (over $100,000 due to compounding interest).
Often our clients find it useful to view it in terms of the last $100,000 left on their loan. When you get to that point – would you rather be continuing to pay your bank or stuffing your superannuation account with that money?
I don’t know about you, but I’d prefer to convert a lower interest rate in to more retirement funds. That’s exactly what happens.
How has this been happening?
The banks have been doing one of two things over the last few years – either increasing home loan rates outside of the RBA announcements, or not passing on the full rate cut.
When the banks adjust their rates outside of the RBA, what they’re doing is increasing their profit margin (they say, it’s because of the increase cost of funds – it might be true in that tiny little window of time, but they know things will bounce back and their margins will grow).
Look at the large difference between the Standard variable, compared to their basic variable loan.
It’s quite the difference. And it shows how much the banks have been tweaking with this over the years (these two rates used to be quite close – about 0.5% or thereabouts).
The fact that they’re offering lower home loan interest rates to new borrowers proves that they’re just after profit.
IMPORTANT POINT: Even the advertised rates (as below) are not the banks best rates. We’re negotiating every day with banks like the ANZ to get much lower interest rates than they advertise.
Here’s ANZ’s example from today (16 May 2017):
If you want to see today’s rates, just go over here and do a search now and filter by your own bank to see their variance (then double check your rate by comparing to the lowest advertised plus… Don’t forget to remove the filter to compare to all banks).
Here’s what happened when I removed the ANZ Bank filter so you could see all loans:
This search was conducted at the same time, as the above ANZ search, on the morning of 16 May 2017. Search online to see the interest rates are available today.
Why is this happening?
Obviously banks have been loading their rates up for existing clients, but are prepared to offer new borrowers a much lower interest rate.
People are lazy, and they resist change. Banks know this, and take advantage of human nature.
They know that most people rarely check their home loan rate. They cop the rate rise, because they can’t be bothered making the effort.
And no doubt they’ve got algorithms that have determined they make the most profit when they let a few customers leave for better rates – by keeping everyone else on a fatter margin.
What can you do?
Surprisingly most people don’t regularly review their home loan interest rates, so you should at least talk to someone who can make it quick and easy for you.
If you’re our client, we’re always negotiating hard on a regular basis. We’ll be contacting your bank directly to push down your rate as often as we can.
But if you see something out there that you like, reach out to us if you think your current home loan interest rates are not as good as they could be.
If you’re new here and searching for a better deal, book a meeting with one of our experts.
A five minute chat is usually all it takes to work out whether you might be able to get a better deal than what you’re on right now.