Fixed to SVR, lender has high rates

[Burramys]

Advice is sought about a mortgage. The fixed term expires soon, and the bank has advised that the new SVR rate will be 5.35%, reducing to 5.10% soon. This bank has a rate for new mortgages of 4.74%, comparison 4.76% and I think that there are better rates around. I hope to sell the property in FY16, and it will be on the market on 1 July.

Why does the bank have a lower rate for new mortgages and not look after existing customer? Is there any way of obtaining this new mortgage rate? Finally, is it worth getting a lower rate with another lender for what may well be a very short period?

It would be quite neat if the change of title could include the mortgage. Gotta stop smoking that green vegetable substance.

 

[Peter_Tersteeg]

Almost any mortgage set up more than 2 years ago is almost certainly going to have high rates than what you'd be able to get today. We're negotiating rates on almost every loan we submit right now.

It would cost the banks millions if they gave all their existing customers the same rates.

Call your bank, ask them for the better rate. They'll almost certainly accommodate you.

 

[Redom]

Advice is sought about a mortgage. The fixed term expires soon, and the bank has advised that the new SVR rate will be 5.35%, reducing to 5.10% soon. This bank has a rate for new mortgages of 4.74%, comparison 4.76% and I think that there are better rates around. I hope to sell the property in FY16, and it will be on the market on 1 July.

Why does the bank have a lower rate for new mortgages and not look after existing customer? Is there any way of obtaining this new mortgage rate? Finally, is it worth getting a lower rate with another lender for what may well be a very short period?

It would be quite neat if the change of title could include the mortgage. Gotta stop smoking that green vegetable substance.

Which lender is it Burramys?

Have you asked the lender to reduce their rate? The SVR discount may have been negotiated during different competitive dynamics/funding costs/higher LVR, etc. That rate is a little out of market, a pricing request should bring it down. No need to refinance, especially if you're selling within 12-24 months.

Cheers,
Redom

 

[perthguy]

I just went through this with my lender. You can call and ask for a better rate. I think providing the rate you want might help. For example, you can mention that you can get x rate if you move to x institution. LMI is a complicating factor.

The rate I was offered was 5.2% which is dropping to 4.95% post refinance. Given that, I refinanced to ING at 4.63% which is now dropping to 4.38%. My broker actually found some better rates but not with the features I was looking for. Refinance cost about $1k but will save around $6.8k in interest per year. So, well worth it for me. Just remember if you do refinance that you are looking for lender policies, loan features and rate, not just the cheapest rate.

 

[Redom]

I just went through this with my lender. You can call and ask for a better rate. I think providing the rate you want might help. For example, you can mention that you can get x rate if you move to x institution. LMI is a complicating factor.

The rate I was offered was 5.2% which is dropping to 4.95% post refinance. Given that, I refinanced to ING at 4.63% which is now dropping to 4.38%. My broker actually found some better rates but not with the features I was looking for. Refinance cost about $1k but will save around $6.8k in interest per year. So, well worth it for me. Just remember if you do refinance that you are looking for lender policies, loan features and rate, not just the cheapest rate.

Well played perthguy - adding to it, plenty of lenders are offering 1k rebates, in some cases, wiping the refinance cost down to zilch.

 

[Jamie M]

Why does the bank have a lower rate for new mortgages and not look after existing customer?

It's a pain - but the reality is that they're more interested in attracting new business.

Call them - tell them you're refinancing to lender xyz and xyz% rate and see what they say.

Cheers

Jamie

 

[albanga]

This is with everything you pay for in life. The sad truth is that probably 95% just accept it as "that is what I pay".
I guarantee that if every person looked at there expenses and started making calls, switching providers.etc then they would hundreds better off per month and that's not including the biggest thing being the mortgage!

I do this exercise yearly and always save money.
Last week Foxtel dropped me down $40, gave me a free box, some movies and sport for free for 3 months because I mentioned Netflix.

Changed home insurance provider and saved $40 a month for better cover.
Car insurance came and I said "not happy I'm moving" $200 later, same cover.

Currently looking at electricity where it is presumed could save about $400 a year.

Mobile phone, Internet, private health.etc

It takes a couple of hours at most and you can pocket yourself a lot of money.

 

[Juliana Ardila]

Advice is sought about a mortgage. The fixed term expires soon, and the bank has advised that the new SVR rate will be 5.35%, reducing to 5.10% soon. This bank has a rate for new mortgages of 4.74%, comparison 4.76% and I think that there are better rates around. I hope to sell the property in FY16, and it will be on the market on 1 July.

Why does the bank have a lower rate for new mortgages and not look after existing customer? Is there any way of obtaining this new mortgage rate? Finally, is it worth getting a lower rate with another lender for what may well be a very short period?

It would be quite neat if the change of title could include the mortgage. Gotta stop smoking that green vegetable substance.

Depending on the bank, you may get a good discount if you call them. What bank are you with?

 

[Terry_w]

It would be quite neat if the change of title could include the mortgage. Gotta stop smoking that green vegetable substance.

Change of title does require a change in mortgage.

Just change banks - if you can.

 

[Burramys]

Thank you for the above advice. The lender is AMP, and I'll contact them next week. MECU has 4.60%, and Wide Bay has 4.4% SVR comparison 4.64%. These would be starting points, and there may be others in that range, circa 50 basis points below what AMP offer.

Is the AMP offer just to see what they can get away with from the financially unwashed?

 

[Rolf Latham]

Hiya

If you are with AMP for the primary reason most structure minded brokers use them, and your circumstances are still similar than when you took out the mortgage, you may not qualify with another lender.

It seems that the primary focus is rate,so why not try loans.com.au or one of the other online self service providers.

ta

rolf

 

[Burramys]

Rolf, even better. Application made, and I will see what AMP have to say.

 

[Rolf Latham]

Why does the bank have a lower rate for new mortgages and not look after existing customer?

Simple but not obvious.

What I had explained to me recently from a funder...............

Cost of funding today is a bunch less than 2 years ago, and even more say than say 5 years ago.

A lender needs to make x amount of margin on a loan to make it viable to hold.

When that x margin isnt available, there is no commercial reason for the lender to hold that loan..........................

Conversely, they can provide that lower rate to a new borrower, since the cost of funding right now is lower, while still maintaing their margins.

ta
rolf

 

[Burramys]

Simple but not obvious.

A lender needs to make x amount of margin on a loan to make it viable to hold.

When that x margin isnt available, there is no commercial reason for the lender to hold that loan..........................

Conversely, they can provide that lower rate to a new borrower, since the cost of funding right now is lower, while still maintaing their margins.

Not obvious. There are two possibles for the X margin - dollars and percentage. Would it be correct to say that as the mortgage dollar value goes up the percentage margin can come down?

With an existing mortgage, would not there be less costs to swap that loan at a lower rate than to set up a new one? A hypothetical. I pay off the current mortgage and then apply for a new one with the same lender at the rate for new loans. Can't be done easily or at all, just a mind game.

 

[Rolf Latham]

A hypothetical. I pay off the current mortgage and then apply for a new one with the same lender at the rate for new loans. Can't be done easily or at all, just a mind game.

not a mind game at all

a common strategy

sometimes lenders will play ball, sometimes they dont

Your age and the amount the current loan has been on IO for can be a determinant, a scan sometime specials are for new money only for the specific reason.

AMP has none of that per se


ta
rolf