BORROWERS BENEFITTING FROM RATE DISCOUNTS

Although it has spent much of the past year inflicting pain on borrowers with 10 consecutive increases to the official interest rate, the Reserve Bank of Australia (RBA) has noted that almost a third of all borrowers have managed to secure a discount on the interest rate charged by their lender.

In its March bulletin, the RBA explained that while lenders have been passing on the central bank’s consecutive cash rate increases in full to variable reference rates, few borrowers pay rates as high as these.

“Instead, borrowers are offered, or negotiate, a discount relative to these reference rates,” the RBA said, pointing to strong competition in 2022 with banks vying for new and externally refinancing borrowers, particularly those of higher credit quality, in addition to adjusting discounts to retain existing borrowers.

“… around 30 per cent of variable-rate borrowers have renegotiated a lower rate on their housing loan with their existing lender since May (2022),” the RBA said.

“Many borrowers have also refinanced with a new lender, with major banks extending cashback offers to customers of around $2,000–$4,000.”

The RBA doesn’t mention what part finance brokers may have played in negotiating discounted rates, but it’s most likely a broker would be involved. Borrowers have shaved at least one percentage point off their home loan interest rate through a broker contacting a bank on their behalf and getting a result.

Many thousands of borrowers are also refinancing to achieve a better loan deal. According to the Australian Banking Association (ABA), from almost 309,000 mortgages refinanced over the last six months, data provided by banks showed close to 215,000 – or 70 per cent – of customers switched lenders, while only 94,045 stayed with their existing bank.

While new customers generally get the best offers to lure them in, the fierce competition is forcing banks to offer existing customers incentives such as rate discounts up to one per cent and cash back to prevent them leaving.

Refinancing your existing home loan has never been easier. Please contact Bell Partners Finance for a better deal today.