Why your bank may be ready to cut your home loan rate
NAB has revealed applications for home loans dropped 15% in the three months to June, while mortgage brokers have seen even bigger downturns. Here's how you can play the market for a lower rate.
Australian borrowers may have more bargaining power than they've had in months.
New figures from NAB show home loan applications fell 15% in the June quarter, while broker data points to an even sharper slowdown.
As competition for new customers intensifies, experts say borrowers may be in a stronger position to negotiate a lower rate or secure a refinancing deal.
In its ASX announcement yesterday, NAB revealed it had received 15% fewer applications for its home loans in the three months to June than in the previous quarter.
The announcement came after mortgage company Loan Market reported applications to around 6000 brokers - some its own, and others whose data it collects as an aggregator - had declined 26% between February and June.
The results make sense to Newcastle-based Loan Market broker Liam Hardy, who says he's seeing a "downturn in commitment".
"People are taking a lot longer to decide whether or not their idea to purchase a property or even refinance is worth it," he says.
Despite recent Reserve Bank efforts to tighten money supply and fight inflation, Hardy says the slowing demand for mortgages is motivating some lenders "hungry for business" to more actively court borrowers.
"We've had some offers just this week come through from lenders who are offering special or limited time offers [with] rates for variable home loans in the 5.9 to 6 % range... a lot of the main players in the market, they're not playing under 6%," he says.
Hardy's observation is backed up by data from mortgage comparison site Canstar, which shows 28 different lenders cutting rates on their new customer variable loans in the last two months, including Macquarie - Australia's fifth-largest lender.
Why is mortgage demand falling?
Loan Market credit expert Shay Waraker says a series of high-profile events has caused demand for home loans to cool between February and June.
"Over that period, there were three cash rate increases, so that significantly impacted people's borrowing power. We also had the federal budget in May which changed the tax environment for investors, so we saw the investors taking a bit of a step back."
NAB has also pointed the finger at changes to negative gearing and capital gains tax for its slimming mortgage book and told the Australian Financial Review that war between Iran and the United States had also created uncertainty for customers.
How you can save
Money experts say these recent shifts in the credit market could create some opportunities for mortgage holders to get a lower interest rate.
"If you haven't actually checked and compared your interest rate since the start of the year, then it's definitely a good time to do so," says Waraker.
"Lenders would likely have increased their interest rates in line with those Reserve Bank cash rate increases, so it's definitely worthwhile checking to see if that rate is still competitive or if there's a better deal out there."
In another sign of a mortgage market potentially shifting in favour of borrowers, several Aussie Reddit users have reported receiving cold calls from banks offering them money if they switched their home loan.
How to look for a cheaper home loan
- Look at what other offers are available. If you have a mortgage broker, ask them to do this for you.
- Contact your current lender to see if you can negotiate a better deal or any incentives to stay with them.
- Consider any discharge, break or application fees that might come with refinancing and switching to a new lender.
- Beware of scammers. If you receive a good offer via a cold call from a reputable-sounding institution, don't provide too much personal information straight away.
- Go to the business's website to check offers and contact them using only links and contact details you've found yourself.
Refinancing costs to be aware of
Money coach Marion Mays agrees now is a good time to shop around, but recommends considering any costs that might come with refinancing before you switch to a new lender.
"When you look at the discharge cost, any break costs and a new application fee, they're all costs that you need to consider in the equation when you work out: Is this actually saving me money in the long-term?"
She also says to be sceptical of any cold calls from a lender offering you a better deal.
"Get just the basic details and where they claim they're calling from. Then jump off the phone and go onto that provider's website and call them direct if you're interested in pursuing [an] offer."
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