Why It’s the Right Time for Homeowners to Shop Around for Better Interest Rates

Why It’s the Right Time for Homeowners to Shop Around for Better Interest Rates
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We’re currently in a period of historically low interest rates. In fact, home loan rates have hit a new rock bottom, with the first interest rate under 2 per cent now hitting the market from Loans.com.au.

Loans.com.au’s 1.99 per cent home loan rate is now the lowest variable rate in Australia. That said, after the first year, the 1.99 per cent loan does revert to an ongoing variable rate of 2.57 per cent.

But for now, it is a clear indicator that we are in the middle of a home loan rate war, and low-cost lenders like Loans.com.au are really upping the ante to draw business away from the big four banks.

What this also means is that it’s never been a better time to be a mortgage holder looking to refinance.

Australia in a refinancing boom

As the COVID-19 pandemic continues to sting household budgets, homeowners looking for quick ways to reduce expenses and get into a better financial position may have been the driving force for the high number of refinances throughout May.

Around $15.1 billion worth of home loans were re-mortgaged with an existing lender or an external lender in May, according to the latest Australian Bureau of Statistics (ABS) figures. This was a 25 per cent increase from April.

$10 billion worth of home loans were refinanced specifically with an external lender in May. The 21,000 plus refinancers may have been encouraged by the flooding of low rate offers to the market.

External refinancing % change % change
Apr 2020 – May 2020 May 2019 – May 2020






Notes: Based on the number and value of new loans to owner occupiers using seasonally adjusted figures.

Source: ABS lending indicator statistics for May 2020, released 10 July 2020.

It’s also no secret that some of the most competitive home loan rates are reserved for new customers as a means to get them on the books. Mortgage holders who have been slugged with higher interest rates, aka the Loyalty Tax, are finally capitalising on record low home loan rates.

RBA encouraging Aussies to refinance

If you’ve never considered whether the home loan rate you’re paying is still competitive, now may be the time to shop around. At least, that’s what Reserve Bank of Australia Governor, Philip Lowe, suggests.

In an online speech on 21 July, Lowe said the time was right for homeowners to shop around and ask for a discount on their interest rate.

“I encourage people who haven’t already taken up the opportunity to do that to look at their mortgage rate and look for a better deal,” he said.

“For many years I’ve been, in lots of public forums, I’ve been encouraging people to look at the rate they were getting from their bank, and if they weren’t getting a very low rate, go and knock on the door and set up a Zoom conference with their banker and ask for a better deal.

“And if the bank said no, go to another bank.”

Of the refinancing boom, Dr Lowe said it was the first time that the value of refinance loans was almost as high as the number of loans on newly purchased properties.

“I’ve been very pleased to see the amount of refinancing going on. (Through refinancing), people get a better deal, it frees up some cash flow and it puts some extra competitor discipline to the banking system,” he said.

How to nab a lower home loan rate

With all of this talk around refinancing, you may be wondering how you can grab one of these record-low home loan rates. The answer may be as simple as picking up the phone.

Here are some tips to talking your way to a more competitive home loan rate:

  1. Work out your current interest rate. This should be on your latest mortgage statement or on your banking app.
  2. Know your worth. Lenders save their lowest rates for more “ideal” borrowers. If you live in the property, have paid off more 20 per cent the property, are employed full time, and are paying principal and interest, you may qualify for these lower rates.
  3. Research your lender’s rates. Hop onto your home loan lender’s website and make note of what rates they’re offering new customers.
  4. Research competitor rates. Hop onto a comparison website like RateCity, enter in your home loan details, and make a list of some more competitive home loans available on the market.
  5. Call your lender. Now is the time to present your research. Let your lender know you’re a loyal customer and want your interest rate reduced. Explain that for one or more reasons listed above, you are an ideal borrower and want a better deal.
  6. Call their bluff. If they’re not budging right away, now is the time to mention those competitor rates and that you are prepared to refinance.
  7. Ask for a mortgage discharge form. This will show the lender that you mean business and you know what you are talking about. Hopefully this will kick them into serious customer service mode and push them to lower your rate.
  8. Consider refinancing. Seriously, if your lender is still not budging after all of this, it may be worth considering if refinancing to one of those more competitive home loans is right for you.

Lowest rate home loans in Australia

To help you on your refinancing journey, or as ammunition to talk your way to a lower interest rate, here are some of the most competitive home loans on the market:

Lowest fixed owner-occupier home loans

Lender Loan Advertised rate Comparison rate
Bank of us FlexiDiscount Home Loan Fixed Special 3 Year*



Homestar Finance Star Essentials Fixed Home Loan 2 years



HSBC Premier Fixed Rate Home Loan



Greater Bank Ultimate Fixed Home Loan



*Tasmanian residents only.

Note: Based on loan size of $350,000, paying principal and interest. Data accurate as at 23.07.2020.

Lowest fixed investor home loans

Lender Loan Advertised rate Comparison rate
UBank Inv UHomeLoan Fixed 3 Years



Teachers Mutual Bank Fixed Investment Loan 3 Years



Well Home Loans Well Balanced Investment Loan Fixed 1 Year



Note: Based on loan size of $350,000, paying principal and interest. Data accurate as at 23.07.2020.

Lowest variable owner-occupier home loans

Lender Loan Advertised rate Comparison rate
Freedom Lend Freedom Variable Home Loan



Reduce Home Loans Super Saver



Homestar Finance Star Gold Home Loan



Note: Based on loan size of $350,000, paying principal and interest. Data accurate as at 23.07.2020.

Lowest variable investor home loans

Lender Loan Advertised rate Comparison rate
Pacific Mortgage Group Standard Variable Investment Loan



State Custodians Low Rate Investment Loan with Offset



Reduce Home Loans Rate Lovers Variable Investment Loan




Disclaimer: This article contains general information only and is not intended to be used as personal advice.

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