Let the bank know who’s the boss of your home loan

“Banks giving away free money! Hold the front page! Yours to collect. Got a mortgage? You’re eligible. Don’t delay – they want to give it to you … NOW!”

Sounds like a crock? Debt Man gone daft?

No. Deadly serious. It’s just a matter of whether you’re prepared to ask for it. And for certain banks: If you never ask, you’ll never get.

I sang a similar tune a year ago. Those who listened then have already saved potentially thousands of dollars.

But, since last year, it’s got way better. They’ve become more desperate for business. Party time.

If you haven’t demanded your lender show you some loving in recent years, you’re probably, pardon my language, getting shafted.

You’re donating money to the bank’s shareholders. Don’t get me wrong. They appreciate it.

But if that’s you, your lender is taking you for a ride. They look, part gratefulness, part pity, at your loyalty. They are certainly laughing at you. And they do think you’re stupid. And, if you don’t listen up, perhaps you are.

Banks are on a interest rate discounting bender. I think they’re on drugs, in a way we haven’t seen since before the Global Financial Crisis. Their desperation to get, or retain, your business probably surpasses what was happening pre-GFC (when money was surprisingly cheap, as hindsight showed).

They’re not going to just offer it to you. You need to have a whinge, chuck a tantrum, or make them a threat they can’t refuse.

How much is on offer? Depends on how much you owe them. But for example, if you’ve got a loan for $500,000, it could be $2000 a year.

Here’s what you do.

Log in to internet banking. Find out your home-loan interest rate.

Type in “standard variable rate” (SVR) and your bank’s into a search engine. Subtract one from the other. The difference is the discount that you’re on from the SVR for your bank.

How big that discount should be is primarily dependent on how much you owe your lender. The more you owe a bank, the bigger the discount should be.

However … and it’s a big however … the current ferocity of competition means that even if you only got your home loan a couple of years ago, you are probably now out of the market.

In very rough terms, here’s what you should be paying. If you owe $250,000-plus, you should be paying between about 4.9 and 5.05 per cent. If you owe up to $500,000, it should be under 5 per cent. Up to a million, then below 4.95 per cent.

If you’ve cracked seven figures, below 4.9 per cent.

That’s what new customers are getting now. And those figures are only if your loan to valuation (LVR) ratio is at 80 per cent. If you’ve got more equity in your home, the discounts get even bigger.

Some could be paying less than 4.8 per cent.

Banks are desperate for market share. Desperation leads to discounting. And if you’re a good customer, they want you.

What have you got to do?

First, as above, find out if your rate is competitive. If it isn’t, you have two choices.

Call your bank and ask for a payout figure. Tell them you have been offered a better rate by another bank. If the person on the phone has had any training, they will alert the lender’s “retention” team. You should be called back within a day or so. And if they don’t offer you a discount to stay, you’ll know they don’t value your business anyway.

If you don’t know what you’re doing or you don’t have the confidence to put on the boxing gloves with your bank, “do yourself a favour” (as Molly Meldrum would say) and get a mortgage broker fighting for you.

Brokers know which banks are doing what deals. They will know either straight away, or can find out quickly, which bank will likely do a deal with you. Some banks don’t want to deal with some customers, some occupations, some people with credit problems.

It’s like giving yourself a pay rise. Or a path to owning your home sooner. Or getting a special RBA rate cut, just for you.

Bruce Brammall is the principal adviser with Castellan Financial Consulting (www.castellanfinancial.com.au). E: bruce@castellanfinancial.com.au.