Negotiating directly with Banks

[LearningMan]

Hi all, I am interested in hearing about stories where you have been able to succesfully negotiate a better rate, fees, etc with your bank.

I will start with mine ...

I contacted my bank last week to see if they would offer a higher discount on their current rate. After 20mins of interrogation they called me back the following day and said "we are not saying NO ... we are saying we are leaving the door open".

I told them I would be taking my business elsewhere.

Today they have called and left a vmail to "see how I am going".

Fun and games.

 

[craigb]

yes a bit yuk!

 

[LynnH]

About 10 months ago, I negotiated a higher discount on our Bank's published rates. Initially, it started out as a dispute over a valuation - they agreed with the case I put to them and accepted my valuation.

So I thought, 'in for a penny, in for a pound' ..... and asked for 1.5% discount over the whole portfolio of our loans, quoting an newspaper article in which a MacBank exec was quoted as saying that all the Big Four gave such discounts. There was a bit of a silence on the other end of the telephone, but 4 days later we received a letter approving the discount I had asked for.

Seems to me that if you do a bit of research and sound as though you know what you're talking about, it's 'all good'. Mind you, I don't approach the local branch - they're fine for new loans, but hopeless when it comes to negotiating anything! I call the Mortgage Centre and talk my way as 'high up the tree' as I can, then go from there ..... it has worked OK for me so far.

Cheers
LynnH

 

[LearningMan]

1.5% discount over existing variable rate ? Where is the article from the MacBank exec ?

 

[Rolf Latham]

1.5 in todays environment would be sensational for the borrower, but a disaster for the funder

Would make a just a little bit of a loss

ta
rolf

 

[LynnH]

LM

Let's hope that this manages to get through - my third attempt to reply, but I seem to be hitting the wrong button!

Checked my files, but don't have a copy of the newspaper article (had a 'big clean-out' a few months ago). If my memory serves me correctly, the article was in 'The Australian' about 6 months before I approached the bank. It was part of a series of articles in that particular issue on housing affordability, and the MacBank chap pointed out that, when considering the affordability issue, it should be noted that few people were paying interest at the standard variable rate as most of the banks offered discount packages. He was talking in terms of 'x% discount for $XXXk borrowings, y% discount for $YYYk borrowings' etc. The discount we were receiving was less than what was quoted in the article, so I thought I'd see if we couldn't get a little bit more! Sorry I can't be more helpful than that!

As Rolf says, those sorts of discounts are simply not available in today's lending environment - indeed, it will be very interesting to see whether we continue to get such a discount when the time comes to re-negotiate our loan package in about 12 months' time!

Question for Rolf: what sorts of discounts are available at present? And do all the big banks give discounts, or are they becoming a rarity??

Cheers
LynnH

 

[Bradsdad]

Discounts will depend on the $ volume. Discounts over 0.70% are becoming rarer for sub $750k to $1M. It can also depend when the lender is approached. Their appetite could be bigger 1 week from the next.



Regards
Steve

 

[Rolf Latham]

Hiya Lynn

Im not a good person to ask..................im the first to turn a potential client away when their first question is "rate", since there are many cheaper products you can get by going direct to various online budget lending models, thus I cant add any value to what they provide.

Pre crunch, while there was some competition and the major lenders had to play ball, 80 to 95 pts would not be uncommon for late 6 and early 7 figure loan portfolios.

BUT, almost always this came with reduced flexibility ( forced cross coll, and or amalgamated loans etc .

Today, with the way things are, we are happy to be able to get clients the money they want at moderate terms .70 to 80 pts, but in a structure that suits them, not the lender.

Rate cost is important, but opportunity cost and managing the risk of that opportunity cost today is worth a hell of a lot more for an active investor than it was 12 to 18 mths ago

ta
rolf'

 

[viphar]

LM
Hi. I am a premium customer of CBA and have successfully negotiated a cut of 0.36 from current varable rate. no point fixing at this time as the rates are going to come down. Today NZ cut rates by 0.5%. Also try HSBC - the are offering 3 fixed at 7.99%

Good Luck

VH

 

[LearningMan]

viphar, most banks offer .7% disc on professional packages alone ...

 

[Bradsdad]

viphar, most banks offer .7% disc on professional packages alone ...

On $250k and above. Paying package fees for $150k and below is a waste of time so the discount might be OK if loan amount is smaller. In saying this, the AMP basic would be cheaper & it has an off-set account.

 

[GoAnna!]

Ask them to calculate a pay out figure and do your reseach when they call so you can say what bank and rate you are looking at. In the past I have found that has got their attention like nothing else.

 

[MC1]

Hi Lynn,

I find it incredible that you are sitting on a variable rate of approx 7.85%, especially if it is with one of the majors

 

[LearningMan]

Hiya Lynn

Im not a good person to ask..................im the first to turn a potential client away when their first question is "rate", since there are many cheaper products you can get by going direct to various online budget lending models, thus I cant add any value to what they provide.

Rolf, if you have all the benefits of a package why not ask for a better rate ?

I understand that rate shouldn't be the only thing ... I don't think you can rule out putting a high weighting on actual rate itself can you ?

 

[Rolf Latham]

Hiya LM

No probs whit that at all.

Nail the current and future needs and the structure first, once thats done, fees charges and rate become an issue.

Many folk focus on the rate and the fees and ignore the rest and thus end up with an excellent rate on a structure or product mix that doesnt work for them, thus costing them more in real overall terms.


ta
rolf

 

[LearningMan]

Rolf, as usual ... very nicely put !

Now ... back to negotiating with my bank ...

 

[LynnH]

MC1

Such IR discounts have been around for ages - initially they were only available to professionals (e.g. doctors, dentists, engineers, etc) and with IR spreads around 3%+ a decade or more ago (from memory - MBs please correct me if this is wrong), I would imagine that 1.5% (or whatever was on offer then) was not such a huge deal for the banks, since so very few of their customers were eligible. As the benefits of financial deregulation started to flow and more funding became available - and customers became aware of the existence of such deals - banks started to offer more modest discounts to customers with loans (usually) above $250K, so obviously the IR spread became more critical, as Rolf has pointed out.

Discounts will depend on the $ volume. Discounts over 0.70% are becoming rarer for sub $750k to $1M. It can also depend when the lender is approached. Their appetite could be bigger 1 week from the next.

As Bradsdad said, what is on offer depends on the deal you bring to the table, the bank's appetite ... and probably the mood of the person you happen to talk to on the day!!! We bring a pretty attractive deal to the table (well in excess of the figures quoted above) and the bank is aware that we have business with a couple of other organizations, including a very healthy SMSF, which the bank 'would like to have on board' (quote/unquote). [Not bl@@dy likely - unless they do me a very good deal on their fees! ]

As well as that, I have a modicum of 'insider knowledge' - many moons ago, I worked as PA/Secretary to the manager of a large bank branch and was privy to the deals that were done, to how the deals were done, and sometimes why the deals were done. (This was back in the days when branch managers had real authority ... long before loans were approved by computer!). So I've used this knowledge to negotiate with banks ever since then!

As my hubby says, I "have more front than Myers" - so I figure that if you don't ask, you won't get. The worst that can happen is they say 'No'. And who knows, they may even say 'Yes' just to shut me up!

Apologies for unintentionally hijacking your thread, LM - and the best of luck in negotiating with your bank!!

Cheers
LynnH

 

[Bradsdad]

I started in banking back in '85 and a 1.5% discount seems rather high still but all the better for you,

 

[MC1]

MC1

Such IR discounts have been around for ages - initially they were only available to professionals (e.g. doctors, dentists, engineers, etc) and with IR spreads around 3%+ a decade or more ago (from memory - MBs please correct me if this is wrong), I would imagine that 1.5% (or whatever was on offer then) was not such a huge deal for the banks, since so very few of their customers were eligible. As the benefits of financial deregulation started to flow and more funding became available - and customers became aware of the existence of such deals - banks started to offer more modest discounts to customers with loans (usually) above $250K, so obviously the IR spread became more critical, as Rolf has pointed out.



As Bradsdad said, what is on offer depends on the deal you bring to the table, the bank's appetite ... and probably the mood of the person you happen to talk to on the day!!! We bring a pretty attractive deal to the table (well in excess of the figures quoted above) and the bank is aware that we have business with a couple of other organizations, including a very healthy SMSF, which the bank 'would like to have on board' (quote/unquote). [Not bl@@dy likely - unless they do me a very good deal on their fees! ]

As well as that, I have a modicum of 'insider knowledge' - many moons ago, I worked as PA/Secretary to the manager of a large bank branch and was privy to the deals that were done, to how the deals were done, and sometimes why the deals were done. (This was back in the days when branch managers had real authority ... long before loans were approved by computer!). So I've used this knowledge to negotiate with banks ever since then!

As my hubby says, I "have more front than Myers" - so I figure that if you don't ask, you won't get. The worst that can happen is they say 'No'. And who knows, they may even say 'Yes' just to shut me up!

Apologies for unintentionally hijacking your thread, LM - and the best of luck in negotiating with your bank!!

Cheers
LynnH

Hi Lynn,

I think you have done extremely well with your rates.

Having worked for one of the big 4 in lending for approximately 10 years and now for the last couple of years in the same industry however now self employed, 1.5% was unheard of in my time and I'm sure the other mortgage brokers on here would agree with me that a request 1.5% pricing concession 10 months ago as you stated, would be declined quicker than what we could submit it. So well done on securing such a rate. Obviously I'm unaware of the level of lending you hold, but $4m deals could not even achieve 1.5% only 10 months ago.

I wouldn't mind having a chat to the same institution for my own personal lending

 

[Spectre]

I dont think Lynn is saying she got 1.5.
I think she just got more than the .7

The highest I've ever seen was about 1.25 and that was 3 years ago.
Then they flipped and stung him on the commercial rate.