October 16, 2016
Anyone thinking about their current home or investment loan may be wondering what's been happening with interest rates. The most common question is why their lender is offering new customers a much lower interest rate than existing customer have - for the same loan! Customers are wondering "what ever happened to loyalty?".
The reason is quite simply competition. More than 50% of home loans are now being originated by a mortgage broker, where an uncompetitive lender is very obvious.
Three or four years ago banks were typically giving people discounts of 0.7% off a "standard variable rate" loan.
To win business now they have gradually increased the discounts to about twice the usual amount, to 1.40% and sometimes more. This represents a huge potential saving to borrowers if they can take advantage of it. Saving 0.7% on a $300,000 loan can put $2,100 per year back into the borrower's pocket - and most people would be happy with that.
We've been actively engaging our customers to take advantage of these discounts. We ask the current lender first. Leaving it to us gets the best results because we know their competition. However, they won't always look after existing customers. Some lenders are more helpful.