How one phone call saved two borrowers thousands of dollars

If I suggested one phone call to your existing home loan lender could help you and your family save thousands of dollars, would you make the call?

It is cheeky but a very relevant question and I hope the answer is yes.

Let me explain why. As a borrower, your home loan belongs to you, it is yours.

I understand it sounds a little strange as you owe your lender a considerable amount of money and may feel as though the lender owns you, but what if we changed our thinking and looked to take back a little control.

The interest rate on a home loan determines our repayments and as long as you continue to meet the required payments on a principal and interest loan, you will start to pay off the loan.

If you start to ask questions about the interest rate you start to take back a little control.

If we look back to 2008 and the GFC lenders tended to follow the Reserve Bank of Australia (RBA) decision on interest rates. If the RBA cuts rates by 0.25% then the lenders cut rates by 0.25% and the same applied to any rate increases.

Following the GFC the big banks lead the charge in making independent decisions on their own interest rates outside of any movement from the RBA.

For example, if the RBA cuts rates by 0.25%, some lenders only passed on 0.17% of the rate cut and conversely when the RBA increased rates 0.25% some lenders went as far as increasing rates by 0.38%.

The practice of moving rates independently of the RBA over the past 8 years makes it very difficult for borrowers to understand the margins the banks are actually making on our home loans.

You see, what was deemed an attractive interest rate in 2011, 12, 13 maybe very uncompetitive and too high in 2016.

This is how you can take back control and here’s my challenge.

After Australia Day make a phone call to your lender, enquire about the interest rate on the loan and request a review to see what they are prepared to do with the rate to keep your business.

Let them know you are a valued customer and as it is your loan, you would like to enquire about the best possible interest rate options. Remember, the cost of acquisition is greater than the cost of retention.

Will it work? Well, there is the only way to find out but here are two case studies to put a spring in your step.

Case Study 1 – borrowers had a $900,000 loan and the interest rate was 4.95%. With one phone call last year the cut the rate by 0.61% back to 4.34%. The reduction of rate created savings of $5490.00 in interest.

Case Study 2 – borrower had a $680,000 home loan and with one phone call the lender cut the rate by 0.31% from 4.46% to 4.13%, a saving of $2108.00.

Even with the 2 case studies, you can see the variances in the two rates as one is 4.34% and the other is 4.13%.

Your home loan and the interest rate belong to you, you do have options and you can take back some control.

Enjoy a great Australia Day and please make the call – let us know how you go as we would love to Eccho the great news.