The secret tactic forcing banks to offer huge discounts on your home loan

5 days ago 7

Australian homeowners are feeling the pinch following the Reserve Bank’s latest rate hike, with mortgage repayments continuing to climb and household budgets under immense pressure.

But amid this financial squeeze, a new Money.com.au survey has unearthed a powerful, yet often overlooked, secret weapon in every borrower’s arsenal: the art of threatening to walk away.

It turns out, your current bank might be holding onto a significantly sharper interest rate just for you – if you know how to play the game.

The nationally representative survey found a staggering 49 per cent of mortgage holders performed a strategic U-turn on their plans to refinance after their current bank’s retention team offered them a more attractive interest rate.

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Australia’s mortgage holders are being enticed to stay put, with banks’ retention teams stepping in at the eleventh hour to keep loans on the books, new research shows.

This suggests a significant portion of the market is finding relief without the hassle and cost of a full switch.

In contrast, only 23 per cent ultimately proceeded to change banks, even after receiving a competitive counteroffer.

A further 28 per cent reported not being offered a better rate at all, highlighting the importance of knowing how to initiate these crucial conversations.

How to force your bank’s hand

Money.com.au’s Mortgage Expert, Debbie Hays, says lenders often “sharpen their pricing when a borrower signals they’re ready to walk.”

“Retention teams often have limited pricing authority and a ‘floor rate’ they can offer based

on your loan size and loan-to-value ratio. If you stick to your guns, your file can be escalated

to a supervisor with discretion to apply a bigger discount,” she says.

Debbie Hays – Money.com.au mortgage expert. Picture: Supplied

“I recently had a borrower who was offered a lower rate and cashback from a new lender.

Once their bank chimed in with a retention rate on par, they chose to stay. They’d been with

that bank for more than 10 years. In this case, it was in their interest to stay and avoid

refinancing costs like discharge and government fees.

“In most cases, the best you can hope for is your bank matching the competitor’s rate, they

rarely beat it. However, big-bank customers may find their lender’s retention rate still sits

above what’s available elsewhere in the market or from a second-tier lender.”

The cumulative effect of past RBA decisions, coupled with February’s first rate hike in two years, means that sub-5 per cent home loan rates are now largely a distant memory.

Despite this, Hays suggests that anything above 5.25 per cent p.a. is still considered a good, competitive rate in the current market, reinforcing the need for homeowners to be proactive and informed.

Nearly half of mortgage holders (49 per cent) u‑turned on plans to switch lenders after their bank’s retention team offered a lower interest rate, according to Money.com.au

Mortgage Broker Nick Burgess confirms the significant impact these retention offers can have. “I had a borrower who wanted to refinance out of Bankwest, but the retention team came back with a 0.35 per cent discount on their existing rate,” he reveals.

“On a $892,000 loan, that saved them about $200 a month. It was a ‘stay’ deal that couldn’t be beaten elsewhere.

“These are the kinds of retention discounts some banks can offer but will never advertise,” he reveals, shining a light on the hidden savings available.”

Don’t get tricked: Sneaky bank tactics to watch out for

However, borrowers must navigate a minefield of “sneaky” tactics employed by banks.

One common ploy is offering a fixed-rate alternative instead of matching a competitor’s variable rate.

While seemingly attractive, this often comes with significant “strings attached,” such as being locked in for an extended period and capping extra repayments.

Burgess explains the bank’s strategic advantage: “They lock you in, so you can’t switch without hefty break costs, and they protect their revenue.”

Another cunning strategy sees banks holding back their most competitive offers until the eleventh hour.

While retention deals can deliver real savings, there are a few sneaky bank tactics borrowers should watch out for.

Some lenders only come to the table with their sharpest pricing once they detect genuine ‘exit signals,’ such as a formal discharge request or even when the refinance is progressing through solicitors or the PEXA online settlement system.

This means homeowners often have to commit to the refinancing process before their current bank reveals its best hand.

Furthermore, some banks may attempt to divert customers towards “special internal offers” or cashback deals, or suggest switching between package and basic loan products, rather than simply offering a lower rate to retain their business.

And then there’s the frustrating “review later” delay, where lenders promise to review rates in a few months, perhaps with a small upfront discount, delaying a more substantial reduction.

The research also uncovers a concerning lack of proactivity from lenders: a significant majority of Australian homeowners (62 per cent) report their lender has never proactively offered them a rate review outside of a refinance, compared to just 38 per cent who have.