This month three of the big banks raised interest rates on their variable home loan rate. Despite no move from the RBA, National Australia Bank (NAB) was the only one to stay on hold.
So, if you have a mortgage on your home you might be groaning in preparation of paying more. On an average $500,000 mortgage, you’ll likely be paying an extra $500+ per year.
But you don’t necessarily have to resign yourself to higher rates (though it is savvy to budget for it).
MoneyPlace borrowers are smart enough to step away from the big banks to get a better rate on their personal loan and the same can be done elsewhere.
In fact, your loyalty to a big bank will cost you $134,358 according to money expert Nicole Pederson-Mikinnon writing here in the SMH.
That’s why we put together these tips to help fight back.
There are a plethora of companies that will now help you get a better interest rate. You can use comparison sites like Finder or Mozo.
HashChing was started by a former banker who got a better rate through a broker than through the bank he worked for. They created an online marketplace for home loans and say they don’t just compare but negotiate a deal for you.
Give the bank a call (but psych yourself up first)
Before you pick up the phone, think about this. The big four banks collectively made $31.5 billion in profit last year.
Part of that is because of the interest you’re paying on your home loan. So the first step to fighting back, just ask for a better rate.
If they don’t give it to you be prepared to leave.
Ditch your bank
There’s a caveat to this, to ditch your bank without excess fees you’ll need to have a loan-to-value ratio of less than 80 per cent to avoid expensive lender’s mortgage insurance. That means for example, if your home is worth $500,000 your loan is less than $400,000.
If that’s you, then shop around. According to Mozo, the best variable home loan rate is 3.44% while the best advertised variable bank rate is 5.34%.
A difference of just half a per cent in your rate can make a huge difference. For example 5% down to 4.5% on a 25 year loan of $400,000 would save you almost $35,000.
Lastly, don’t give in to apathy
If someone told you that you could spend two hours working and earn $35,000, you’d do it in a heart beat. If your mortgage is larger it could be a lot more!