Interest Rates and Bank Pricing: Not All Lenders Are Created Equal

If another lender offers you a better deal, it can be worth considering refinancing to save money. Small differences in interest rates can make a huge impact on the life of your loan.

There are also a number of circumstances where refinancing may be worth considering regardless of interest rates.

For example, you may need extra funds to renovate or extend your home, want to consolidate debt, your circumstances have changed, your loan or lender is no longer a good fit for your needs, or you want to change your loan term to spread out your repayments over a longer period.

In some cases, your current lender may be able to alter your existing loan to meet your needs, but in other cases, you may need to restructure the loan or refinance it completely.

While refinancing is generally a straightforward process, some costs are usually associated, so it’s important to weigh up any costs against the expected benefits and interest rate savings.

Different loans also charge different fees, so these must also be taken into account when calculating any projected savings.

NBS Home Loans can provide calculations to ensure a refinance is worthwhile before making any final decisions.

In order to work out whether a refinance is the right option for you or whether you are better off staying put with your existing loan, the best option is to have a mortgage broker review your existing home loan. 

In fact, the law requires us to keep extensive records demonstrating that we have done so and imposes harsh penalties on any broker found to have acted in their own best interest or that of any particular lender when providing advice.

This means mortgage brokers can not refinance your home loan simply for the sake of it; they must be able to demonstrate that there is a clear benefit to you as the borrower in refinancing.

However, you should also review it any time your circumstances substantially change, even if it’s sooner than two years since your last review.

If you have a fixed rate loan, it’s important to review it at least one to two months before the fixed rate period ends to decide on your next steps once the fixed rate expires. These options may include re-fixing it for a further period of time, letting it revert to a variable rate, switching the loan type, renegotiating the rate with your existing lender, or refinancing elsewhere entirely.

Most fixed-rate home loans cannot be modified or refinanced during the fixed term period without attracting significant costs. These can run to tens of thousands of dollars depending on the size of the loan, interest rate movement, and the remaining time until the fixed-rate period expires.

If interest rates are rising across the board, you might expect that most lenders would offer similar rates. Interestingly, that’s not the case, and we still have huge differences in the range of rates on offer from Australian banks and lenders.

.If you compare the advertised rate of a big bank against a smaller lender, you’ll notice they are usually like chalk and cheese.

Big banks generally advertise much higher standard variable rates and slightly higher fixed rates than their smaller competitors.

• Smaller lenders with fewer overheads tend to offer lower rates across several loan types.

Big banks do usually offer a discount on their standard rate if you take out a loan package with them.

• Loan packages usually attract an annual fee (which averages $250 – $395 per year), providing you with access to the home loan itself, one or more offset accounts, and optional extras like credit cards and discounted home & contents insurance.

Big banks are also more likely than smaller lenders to negotiate a lower variable rate with you. Smaller lenders tend not to budge from their advertised rate, but big banks often have more scope to negotiate in order to retain customers.

• These discounts offered by big banks can bring your rate down significantly, but on the whole, smaller lenders often offer lower interest rates overall.

It’s important to keep in mind; however, that rate is not the only consideration when choosing a lender.

Some smaller lenders may be less likely to accept certain income types (e.g. self-employed or casual income), or they may have policies or target markets that mean they are not a good fit for your individual circumstances.

Not everyone with the same loan is being charged the same interest rate.

Many lenders offer discounted interest rates on new loans to attract new business, so you may well be paying more than someone who applied for their loan more recently than you. 

In many instances, lenders will also offer cash-back incentives – which can sometimes be as much as a $4000 rebate – if you refinance your loan to them.

This cash-back offer is designed to offset any costs you incur in the process, plus a bit extra as a sweetener.

These offers can be bad news if you’ve been a loyal customer of your bank for many years, but they can also be a great opportunity for bargain hunters ready to shop around for a new lender.

NBS Home Loans has written a helpful article for Australians on UNDERSTANDING INTEREST RATES, expanding further on our information here: https://www.nbshomeloans.com.au/understanding-interest-rates-in-australia-in-2022/

In addition to the information above, we’ve written an article with some helpful tips for borrowers feeling the pain of interest rate rises.

Click the link below to view.

With hundreds of loans from over 40 lenders and over 20 years of experience, NBS Home Loans take the hard work out of comparing loans to make sure you aren’t leaving any money on the table by missing out on other options.

For more information contact us today on 0434 103 326 to chat about the right home loan fit for your own circumstances.

For an up-to-date overview of the current rates on offer, visit our Facebook page at facebook.com/NBSHomeLoans