How to save $10,000 with a phone call

Written By Unknown on Sabtu, 02 Agustus 2014 | 20.01

Moira Geddes talks to national economics editor Jessica Irvine about the state of the economy and what it means for interest rates.

FOR all our bravado, Australians are, by and large, a shy and retiring lot.

We wait in lines, give seats to elderly people on public transport and stare daggers at anyone who jumps the queue.

When it comes to making purchases, we cringe at the idea of having to haggle or ask for a discount.

Of course, nobody likes queue jumpers, but our inability to haggle could be costing us tens of thousands of dollars in excess interest payments.

A home loan is, for most Aussies, their biggest living expense and source of stress in life.

So let me share a secret with you: you could be paying less.

Indeed, there has never been a better time to haggle on your mortgage.

The mortgage war which erupted between lenders over a week ago has so far only benefited new borrowers looking to sign on to new low fixed-term loans.

Save on your mortgage ... News Corp Australia's Jessica Irvine shows you how. Source: News Limited

But existing borrowers on variable rate loans can bag a bargain for themselves too.

The forces that are driving the fixed-rate war — cheaper funding costs for banks on international wholesale markets and falling term deposit rates — are also giving the banks more room to discount on their variable rate loans.

All you need to do is ask. Don't have the confidence?

Fear not, let me show you how it's done.

First, do your research. Look at your latest statement to see what interest rate you are paying.

Second, I want you to ring your bank on Monday morning. Your conversation should go something like this ...

"Hello, I have been a customer with your institution for X many years. I'm currently paying an interest rate of X per cent. I am ringing because I would like a better deal than that. I know for a fact that I can get a loan from loans.com.au for 4.54 per cent. Failing that, Northern Beaches Credit Union is charging just 4.55 per cent. Not far above that, State Custodians is offering 4.59 per cent and both rest and UBank have variable rate loans for 4.62 per cent. Can you please explain why I am paying so much more?"

Your bank representative may interject here about their excellent customer service and the peace of mind of banking with a large reputable institution.

"I'm not concerned about that," you reply. "I'm prepared to go with whoever can give me the best deal. What can you offer me to entice me to stay?"

Feeling overwhelmed ... Try this to save yourself some cash on your home loan. Picture: Thinkstock Source: ThinkStock

At this point, you may hear a flurry of keystrokes as your bank representative looks up your details. He or she may offer to wave some of your fees.

"Fantastic, yes I'd like you to wave those fees," you reply. "But I'm still not satisfied. I am a good customer for your bank — I make my repayments and I have other products with you. I don't want to have to switch them over to a new lender, but I know I could save tens of thousands of dollars over the life of my loan by doing so. I'm serious about sorting this out. Perhaps you can talk to your manager to see what discount can you offer me on my mortgage today?"

Cue more keystrokes and a "hold please" before your representative should come back to you with an offer.

"That's nice," you say, "but I want a '4' in front. I can get a loan from dozens of lenders at below 5 per cent, and if you're not prepared to offer me something with a 4 in front, I'm going to walk. Check with your manager again."

And that's it: you're done.

I can't guarantee it will work for everyone, but most reliable borrowers should be able to knock off at least a few basis points from their current rate.

If you owe $300,000, for every 25 basis points you manage to shave off your mortgage rate, you'll save nearly $50 a month in repayments, and more than $10,000 in interest over the life of your loan.

Let me know how you get on: jessica.irvine@news.com.au


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