Puzzle Finance Blog


How to save on your home loan and get a giant discount


HOME-loan discounting has hit unprecedented levels, with banks wiping as much as 1.4 percentage points off advertised rates.

Some borrowers will save thousands of dollars annually thanks to an escalating price war in which lenders are finally starting to return what they took in the Global Financial Crisis.

But not everyone will benefit. The discounts are only going to new customers – and existing clients who threaten to leave unless they get a better deal.

The biggest reductions are being reserved for those who have significant deposits and want seven-figure loans. Until recently it was rare for a lender to offer more than 0.9 percentage points off.

The extra 0.5 percentage points now available cuts repayments by more than $3600 a year.

“These lenders are trying to bring in big fish,” said mortgage broker Hank Hong of Home Loan Experts, who two weeks ago struck a $1.3 million loan at 4.59 per cent. That was a discount of 1.4 percentage points off the advertised variable rate. The borrower had a 30 per cent deposit. Mr Hong wouldn’t say which bank agreed to the deal, although it wasn’t one of the Big Four.

However, one of them is offering discounts of as much as 1.36 percentage points off its advertised rate for those seeking more than $2 million, said 1300 Home Loan (correct) managing director John Kolenda. He wouldn’t say which bank.

Aussie mortgage broker Lindsay Rogers said Suncorp was knocking off 1.27 percentage points on $1 million-plus loans where the borrower had a deposit of at least 30 per cent of the purchase price.

It’s not only “big fish” who are being lured with substantial rate cuts. A borrower after $500,000 towards a $625,000 property can now get more than 1 percentage point off the standard variable rate. A matter of months ago, a discount of more than 0.7 percentage points on such a loan was unheard of. The additional 0.3 percentage points would lop more than $1100 from annual repayments.

Banks including Maquarie, Suncorp, AMP and Bankwest are offering reductions of 1 percentage point or more to such customers, according to broker Mortgage Choice

Leading banking analyst Scott Manning of JP Morgan said lenders were able to offer deeper discounts because their funding costs had fallen. New money to be on-lent to home-loan customers was now about 0.5 percentage points cheaper than the three-year average.

Mr Manning said all variable-rate customers had borne the cost of lenders’ funding pressures during the GFC, as rate rises were supersized and cuts withheld. But the spoils of cheaper funding would not be shared widely.

“The higher cost of funding was passed through to the whole loan book by adjusting the headline rate,” Mr Manning said. “But that’s starting to work its way back – selectively.”

How to get a giant rate discount

*Shop till you drop. The more brokers and banks you speak to, the better chance you have of a great deal Show them the money.

*If you’ve got a deposit of at least 20 per cent of the purchase price you’ll get a better rate.

*Check your credit report. Make sure nothing incorrect is on it which could see you miss out on the best possible deal. Reports are available for free .

*Final offer. If you already have a loan, give your lender a chance to better the best offer you’ve got. But be prepared to walk

Posted by John Rolfe - The Daily Telegraph on 3rd May, 2014 | Comments | Trackbacks
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