Expert reveals tactic to secure better home loan rates as internal refinancing surges

Internal refinancing has surged by 24 per cent annually, with nearly 48,000 Australians securing new deals with their current lenders in June this year.

Money.com.au’s home loans expert, Mansour Soltani, has shared a strategy for homeowners to negotiate better rates with their existing lenders.

“Lodge a discharge form with your current lender that signals your intention to move your mortgage elsewhere, which is a step further than simply asking for a rate review,” he said.

“The retention team will usually contact you to see what they can offer to retain your business, so be sure to have competing lender rates handy as a bargaining chip when they call.”

Mr Soltani noted that this approach is typically more effective for mortgages over $800,000, as lenders are more inclined to retain larger loans.

Analysis by Money.com.au found that borrowers switching an $800,000 loan with a 25-year term from the average rate on existing home loans (6.37 per cent) to the average rate for new loans (6.27 per cent) could save $49 per month or $588 a year.

Borrowers who negotiate a larger discount of 20 basis points could potentially save $99 per month or $1,188 a year.

If lenders are unable or unwilling to offer better rates, borrowers can cancel the discharge and maintain their current mortgage and interest rate.

Data analysed by Money.com.au shows that internal refinancing now accounts for 42 per cent of all refinancing activities.

In contrast, external refinancing, where homeowners switch to another lender, has decreased by 11 per cent annually.

These trends come in the wake of the Reserve Bank of Australia’s decision to maintain the cash rate at 4.35 per cent in August.