Banks willing to cut repayments for borrowers who pick up the phone

afr.com:

Mortgage customers underwater on repayments are likely to be offered deferred repayment plans if they call up their bank, and even those who aren’t struggling are securing big discounts on interest rates just by picking up the phone.

Borrowers who negotiate with their bank, during a refinancing or otherwise, can save an average of 66 basis points on their interest rate – equivalent to two-and-a-half standard, official rate hikes – according to RateCity’s analysis of Reserve Bank data. This represents almost $2400 a year less in repayments on an average $500,000 loan.

Borrowers who engage with their banks are getting more than two RBA rate rises in discounts to the rates they pay. Peter Rae

At Westpac’s full-year results briefing on Monday, CEO Peter King said banks have been fighting to keep hold of existing borrowers, which has squeezed net interest margins. This has included offering more competitive rates to customers rolling off fixed rate loans and considering switching lenders. Westpac said the retention rates for customers on fixed rates rolling onto variable rate loans had hit 90 per cent.

When the cash rate was 0.10 per cent, the average mortgage interest rate for owner-occupiers was 2.86 per cent, a difference of 2.76 per cent. But with the cash rate at 4.1 per cent, the average mortgage rate has been 6.20 per cent, a difference of 2.1 per cent.

The 0.66 percentage point difference can be explained by borrowers negotiating, RateCity suggested this week. So, after an expected rate rise on Tuesday, the average owner-occupier who has not haggled with their bank for the best rate will be on an interest rate of 7.11 per cent – but those who do engage, and request the best rate their bank can offer, could be on 6.55