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5 reasons you may be able to get a lower interest rate

By Luke O'Kelly

The Reserve Bank of Australia (RBA) chose to move the cash rate to 4.10% last week. With the cash rate increasing by 4 percentage points since the start of 2022, many households have felt the pinch of rising interest rates. On top of that, many fixed-rate loans are due to expire in the second half of this year, which could double (or more) the amount of interest those households pay in interest.

If this is you, did you know you might be able to get a lower interest rate? There are a number of things that lenders look at when considering your interest rate. If these have changed since you took out your home loan, it is possible you could get a more competitive interest rate.

Whether your loan is a variable rate or your fixed rate is due to expire, speak to our Loan Market broker Dean McClare 0411 514 287 (Contact Details) to see if they can negotiate a better interest rate with your current lender or another.

Some reasons you may be able to get a better interest rate include:

1. You’ve been meeting or exceeding your repayments. Not only does this show the lender you are a reliable borrower, but if you are paying principal and interest, it will also bring your LVR down (the ratio of how much of your home you own vs the loan). A lower LVR could get you a more competitive rate.

2. You’ve paid off other credit. If you previously had a credit card, other loans or a HELP debt that you have since paid down or got rid of, the lender could view you as less risky.

3. You’ve cleaned your credit file. Improving your credit report could build a stronger case for a better interest rate. You could do this by meeting repayments on time, closing any old transaction accounts that could be charging fees, reporting any errors in your credit file or time passing since any damaging credit problems.

4. You’ve had a pay rise or gained full-time employment. If your employment has changed to be more permanent or you have received a pay rise, you could look more favourable to a lender.

5. You find a lower interest rate with another lender. This could provide better footing to negotiate with your current lender, or you could consider refinancing to the other lender. Keep in mind there could be costs involved in refinancing, so it is a good idea to ask your broker to run the numbers for you to determine if this is in your best interest.

If your situation changes – whether you pay off debt, get a pay rise or have been paying off your loan, it pays to review your home loan. You may be in a better position to get a more favourable interest rate or be able to structure the loan to better suit your circumstances.

Lenders often offer lower interest rates to new customers, so regularly checking the competitiveness of your loan compared to others in the market could help prevent you from paying more than you need to. Loan Market brokers regularly review clients’ loans on their behalf and if they could be getting a better deal elsewhere, the broker does the legwork to negotiate with their existing lender, or move them to one that better suits their needs.

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