Interest rate creep usually refers to the tiny increases that lenders sneak in mid-cycle, often unnoticed by most borrowers. But over the past 18 months, we’ve experienced 6 official rate drops totalling 1.25%, and not everyone has reaped the rewards.
Rather, lenders have passed on rate reductions in a myriad of confusing ways. The big ones have mainly been in fixed rate drops, which are now down under 2% in some cases.
This has left many existing customers the victims of “Interest Rate Creep” in reverse.
Interest Rate Creep occurs when lenders apply rate drops to new customers or specific segments such as First Home Buyers, rather than their existing variable customers.
And with millions unable to refinance due to the impact of Covid-19 on employment and small businesses, some customers are now paying well over the odds for their Home Loan.
Many existing variable customers can often secure a rate in the mid 2’s simply by negotiating with their lender. It just takes an email or a phone call.
In some instances, it may take being prepared to leave. When changing lenders, the incumbent lender is provided with advice of the loan discharge. The retention team then kicks into gear, and offers a better deal to stay.
If it’s simply a better deal you’re after, and you don’t necessarily need to restructure, make sure you make the call (or have us do it for you) before going to the trouble of refinancing. Save the full application and associated costs for when you really need it.
And if you need advice around the options, including the impact of potential break costs on Fixed Rate options, don’t hesitate to get in touch.