Keen to negotiate a lower interest rate?

After a series of rate rises throughout 2022 and 2023, the Reserve Bank of Australia (RBA) finally began what appears to be an easing cycle in 2025, cutting rates twice in the first half of the year, with predictions of more to come.

If your home loan variable rate had been going up and up over the previous few years, you may be wondering how you could now save thanks to the latest rate cuts.

To make it easy for you, Canstar has a three-step plan on how to haggle:

Step 1: Find the best rates and calculate how much you could save

In order to drive a hard bargain, you’ll need to be backed up by the facts. While in the past you may have been able to get a mortgage discount just by asking, some lenders are getting stricter, and may require you to provide written evidence of lower rates before they’ll be willing to budge.

Check your current interest rate and repayment, and find out what deals your lender is offering new customers – lenders often save their best deals for these new customers in order to attract new business, but remember, your ongoing loyalty is also important to them.

Consider comparing alternative mortgage options from competitor banks and mortgage lenders. As well as competitive rates, you may also be able to enjoy features, benefits, and customer service that better suit your household’s needs.

You can use a mortgage repayment calculator to get an idea of how switching home loans could affect your personal finances. Remember to consider both the short-term repayments and the total interest you’ll pay on the property over the long term.

For example, imagine if you had a home loan with $250,000 remaining, to be paid in monthly principal and interest repayments over a 25-year term at a rate of 7%. If you were to switch to a lender offering a 6% interest rate, here’s a how the numbers would change:

← Mobile/tablet users, scroll sideways to view full table →

Source: Canstar Mortgage Calculator. The results from this calculator should be used as an indication only. Results do not represent either quotes or pre-qualifications for a loan. Results do not account for loan fees or changes to the interest rate over ime. The specific details of your loan will be provided to you in your loan contract. It is advised that you consult your financial adviser before taking out a loan.

It’s also important not to be dazzled by a low interest rate, and consider the fees and other charges that may be involved. A home loan’s comparison rate can help indicate the approximate total cost of interest and standard fees and charges, giving a closer indication of a mortgage’s total overall cost. In fact, lenders are legally required to display a comparison rate alongside any displayed interest rate, to give borrowers a clearer picture of how their loan could actually look, so be sure to check.

You may also want to consider how much it may cost you to refinance your mortgage. There may be fees to pay when exiting one mortgage and upfront fees for switching to another, as well as break costs if you’re on a fixed interest rate. If you’ve worked out the potential savings from refinancing, you can estimate a ;break even’ point, when the benefits of switching make up for the costs.

For example, if it costs you $1000 to refinance, but you would save $50 a month in repayments, your break-even point is 20 months. This means it would take you just under two years to recoup the cost of switching your home loan.

Step 2: Are you a ‘high value’ customer?

If you want a better home loan rate, you need to speak your lender’s language and understand what makes a borrower sought-after by a bank.

If you can tick more than three of these boxes, then you may be in a great position to negotiate:

• You live in the property as your primary place of residence.
• You’re paying principal and interest.
• You’re on a variable rate.
• Your Loan to Value Ratio (LVR) is below 80%.
• You have a ‘very good’, ‘great’ or ‘excellent’ credit score.
• You’ve been an employee in your role for more than six months.
• Your serviceability ratio is around 30%.
• Your property is not in a high density location.
• You have found a better offer and have the documentation to back it up.

The amount of equity you have in your home can make a big difference to your rate. The lower your LVR, the lower the interest rate a lender may be willing to agree to at the negotiating table.

However, some factors could potentially hinder your bargaining power. For instance, if you’ve bought a small apartment in a high-density area, that can be a red flag for some lenders – if the property may be hard to sell at short notice, it may not be suitable security for a home loan. .

Lenders may also be concerned about what other debts and liabilities you owe. Even if you earn a high income, having debts on multiple credit cards and a few buy now pay later (BNPL) arrangements may reduce your appeal with lenders.

Also, if your employment has been inconsistent, or if you have some late repayments in your credit history, this could affect your ability to do some hardball haggling and negotiations.

Step 3: Prepare to haggle

Once you have all of the necessary information and calculations available, you’re ready to contact your bank. Here is a script we’ve put together to point you in the right direction:

Script for contacting your bank: Home loan negotiation

“Hello . I’ve been checking how my mortgage rate compares with the rate you’re offering new customers, and I’m disappointed that my rate is so much higher.

[Don’t forget to have those crucial figures – interest rate, repayment, account details and the market-leading rates – at your fingertips. Remember, the lender may ask you to provide written proof of alternative offers.]

[Refer to the boxes you ticked in Step 2 and highlight all your credentials that make you the ideal borrower.] 

My home is not an investment loan. I pay principal and interest, have a great credit score and a lot of equity in the property.

[Speak your lender’s language.] For the bank, I’m a low-risk customer and I’m sure you’d want to hang on to me.

[Ask for what you want.] I’d like the rate you’re offering new customers, otherwise I’m happy to take my business elsewhere.

[The lender may offer a sweetener to stay. Perhaps a 0.15% discount. Consider carefully whether you really want to take this first offer.]

I’m sure you can do better than that. I know you are offering new customers ‘X%’ and as I said ‘XYZ Bank’ has a better rate… I might have to take my home loan there.”

[At this point, the lender may ask you to provide details and evidence of any other competitor offers. You may need to send through websites, screenshots or photos to help support your case.]

[Not getting anywhere? Ask to speak to someone higher up and be ready to ask for a mortgage discharge form to show that you’re serious about walking away if they aren’t willing to budge.]

Remember to always be courteous and patient when dealing with the bank. The employee you’re speaking to may have their own script to follow, and may be limited in what they can offer you. In some cases, you may need to submit documentation to back up your position, such as written evidence of lower rates being offered by competing lenders before your bank may be willing to match or beat it.

If your negotiating is successful, you should get the reduced rate in writing via email immediately. Once you receive your next mortgage statement, you can confirm that it’s been put into effect. And if the bank is unwilling to compromise, you can prepare to refinance with an alternative lender.

Main image source: belozu/Shutterstock.com