Mortgage holders could be costing themselves thousands by failing to capitalise on ongoing low interest rates and subsequent intense lender competition.
Savings and discounts from lender’s standard variable rates obtained now by borrowers can often stay with them with that lender in the future, and borrowers are often unaware.
Smartline financial adviser Michael Karp told Property Observer that taking the time to try and get a better loan deal now could be well worth it if the discounts were ongoing.
“Working out whether you can get a better deal on your home loan is one of those things that often ends up in people’s ‘too hard’ basket – it’s seen as being a difficult and tedious process,” Mr Karp said.
In this current environment, the bank might offer you a 0.8% discount off their standard variable rate in the knowledge most people will not ask for more – but a mortgage adviser may well be able to get you something like a 1.0% discount depending on your circumstances.”
Mr Karp lays it out clearly in Property Observer by giving the simple example of a $350,000 loan taken out over 30 years at an 80 per cent lend.
In this example, let’s say the standard variable interest rate is 5.45%. If the borrower goes to the lender directly, without an adviser or broker, they might be able to obtain a discount of around 0.8 per cent, bringing the interest rate down to 4.65 per cent.
If the borrower used a broker however, who can use their contacts, experience and skill to obtain a bigger discount of 1.0 per cent, the interest rate comes down to 4.45 per cent and the borrower will save $7130 over the life of the loan.
It’s a wise option for borrowers to heed Mr Karp’s advice and ensure they are taking full advantage of not only low interest rates, but discounts to rates that stay once they’re secured in the current highly competitive mortgage loan market.