Fusion Partners Central Coast - accountants, business advisors, financial planners Institute of Chartered Accountants

The Real "Best Home Loan Interest Rates"


 

created by John Cahill

23 July 2011

 

 

Question

    There are two questions i frequently get asked

    "What is the best free bit of advice you can give me in 5 minutes?", and

    "What rate should (or could) i be paying on my home loan?".

    .

    Answer

    Fusion Par/tners are not mortgage brokers, but as accountants and financial planners, we get mortgage brokers contacting us on a weekly basis, trying to get us to refer clients to them.

    They know that we are 'in the know' and offered competitive rates all the time, so they always offer us 'cut to the chase' rates.

    They are as low as the banks will go, no messing around. So as an individual going to a lender, i am pretty confident that you will not be able to do better. However armed with 'inside knowledge' of what interest rate a lender can give you, you are better able to negotiate in order to get yourself the best possible rate.

     

    Generally, the current standard variable rates are around 7.6%, with a reduction to about 7.0% depending on loan size, whether you do banking or have credit cards with that lender, eligibility for pro packages/wealth packages, servicability, amongst other factors.

    The following are the best rates we know of, and are for home loans up to a maximum of 80% LVR. (ie : loan = 80% of valuation of property). All rates are 100% variable.

     

    Under $500,000 borrowing = 6.92% (maybe 6.87% with justification to the bank why you are worth it)

    $500,000 to $1,000,000 = 6.87%

    $1,000,000 to $1,500,000 = 6.77%

    Greater than $1,500,000 = 6.67%

    High Net Worth Individuals = 6.60% (ie: you are borrowing in excess of $10 million and the bank will fight for your business)

    Getting down to the lower rates will require "head office" approval.

    All of the above rates are on wealth packages / pro packages where you pay between $350 and $400 a year.

    Our advice to anyone is to drop into your bank, or even just give them a call, and tell them these are the rates you have been advised you can get. Tell them you are considering moving your loan to another bank, purely in order to get a lower rate, and say you want to give them the chance to match it first.

    You will be surprised at the results. A simple phone call to the call centre will usually get them to drop the rate by a little bit (about 0.1% or 0.2%) straight away. They will then have to transfer you to a home lending 'specialist' to get any further drop in rates. Ask to be transferred to this home loan specialist or ask for them to call you back. These are the people who have the authority to drop rates more significantly.

    You may not be able to get them to exactly match the rates listed above, but we have had a 100% success rate of getting at least a 0.2% reduction in rates from the existing lender. (On a $500,000 loan, that is $1,000 in interest, every year - pretty good for a 5 minute phone call.)

    You will have to weigh up other factors, such as the convenience of having all banking and loans with one bank, and the costs of switching, before making any decision to move lenders, but at a minimum you should be able to reduce the rate you pay with your existing lender.

     

    Addition :

    All of the rates i am taking about are standard variable rates. These rates are from the major banks, and are not building societies or internet lenders. They are full service accounts as though you walked in the front door.

    You may find lower interest rates from internet sites, but the major banks will not match these rates as they argue they have extra overheads from branches, and they provide a full service product.

    Of the intternet lenders UBank is probablly the most secure as it is backed by NAB. At the time of writing their standard variable rate is 6.79%.

    There are risks associated with using an internet loan provider. You should check the fine details about entry and exit fees in particular. There may be annual fees as well. Also ensure there is not a honeymoon variable rate that will stop after 6 months or 1 year.

     

    How we can help

    Firstly, we have given you free information about the rates that other people are getting, so you can approach your bank directly.

    If your lender won't match the rates, and you want to switch lenders to get the rates listed above, just contact us by phone on 02 4367 3333 or contact me directly on john.cahill@fpcc.com.au and i am happy to help out and put you in touch directly with the lender that will give you the best rate for your size loan.

     

    The above rates are for residential loans only. We also have lenders offering competitive loans for commercial property, margin loans and borrowing in super, so if you want advice on the best rates on these loans, please contact us.

 

Disclaimer

This article has been prepared for clients of Fusion Partners Central Coast (FPCC) ABN 37 113 405 218 and others on request.

The article is based upon generally available information and is not intended to be, or to replace specialist advice in the areas covered but rather, the article is intended to be informative and educational only.

Although the information is derived from sources considered and believed to be reliable and accurate, FPCC, its employees, consultants, advisers and officers to the maximum extent permitted by the law disclaim all liability and responsibility for any opinion expressed or for any error or omission that may have occurred in this document.

This article may contain general advice which is defined in the Corporations Act to mean that we have not taken into account any of your personal circumstances, needs or objectives. It is therefore imperative that you determine, before you proceed with any investment or enter into any transactions, whether the investment or transaction is suitable for you in consideration of your objectives, financial situation or needs and you must therefore, before acting on any information included in this article, consider the appropriateness of the information having regard to your personal situation. FPCC recommends that you obtain financial and tax or accounting advice based on your personal situation before making an investment decision.

All investments should be made with consideration of risk after reading the FSG and PDS of the product provider, and after obtaining professional advice from a financial planner.

This article was created by John Cahill, based on legislation in place at the time.  Legislative changes may mean that this information is no longer current.  You should speak to your financial adviser.

We give no guarantees as to the issuing of loans at specified rates, and all loans are subject to approval by the lender, based on personal circumstances and documentation provided by the borrower.

Fusion Partners and its subsidiaries are not Mortgage Brokers and do not write loans.

Interest Rates are changing all the time. The interest rates listed above are variable rates as at 23 July 2011 and are subject to change.