There’s nothing more frustrating than realising you’re overpaying on home loan interest.
If you’re able to find a better home loan deal, you could reduce your interest rate, lower your mortgage repayments and ultimately pay off your home loan sooner. This can not only save you money but also minimise stress associated with your home loan. It's crucial to compare home loans, including fees, to understand the total cost and make an informed decision.
Many borrowers assume their interest rate is fixed and non-negotiable, but that’s not the case. With the right strategy, you can negotiate a lower rate with your lender and reduce your repayments.
In this article, we’ll explain how you can negotiate a better interest rate and what to do if your lender refuses to lower your interest rate.
Have you ever wondered if you are paying too much on your home loan?
You may asked yourself if your interest rate and home loan as a whole are still competitive. Evaluating your existing mortgage is crucial to ensure you are getting the best possible terms.
One way you can find if you have a high interest rate is by having a look at what rates and deals are currently available on the market.
If there has been a recent cash rate drop, lenders may be offering lower rates to attract new customers.
Equally, if your financial situation has changed – for example, you’ve gotten a pay rise, or your lifestyle has changed – it could be worth seeing if there’s a home loan better suited to current circumstances. Considering your property value when evaluating loan options is essential to find suitable offers and negotiate better rates.
There may be new avenues available to you that can reduce the interest you pay over the life of your loan.
For example, you might benefit from an offset account to bring down your interest.
Or, a redraw facility could give you the confidence you need to start making extra repayments to pay your home loan faster.
If it’s been more than 2 years since you refinanced, it could be worth speaking to an Aussie Broker to have a look at all your options.
Can I really negotiate my home loan interest rate?
Yes, you can negotiate your home loan interest rate. Just like when it comes to negotiating your salary, if you don’t ask for something better, you likely won’t get it.
Most lenders aren’t going to just spontaneously offer you a better rate – you’re going to have to ask for it.
Of course, asking for a lower rate doesn’t guarantee you’ll get one. For example, if you have a history of being inconsistent with your mortgage repayments, lenders may be less willing to reward you with a lower interest rate. Engaging a mortgage broker can be beneficial as they have access to multiple lenders, can negotiate on your behalf, and help secure better loan terms and rates.
Why negotiating your interest rate matters
Your mortgage is one of the biggest financial commitments you’ll make, so it’s essential to secure the most competitive rate possible. A lower interest rate means:
Lower monthly repayments, freeing up cash for other expenses or investments.
Less interest paid over time, potentially saving tens of thousands of dollars.
More financial flexibility, allowing you to pay off your home loan faster if desired.
You might also be interested in: Which banks are passing on the May 2025 rate cut?
Can I lower my interest rate without refinancing?
It may be possible to secure a lower interest rate without refinancing if you’re able to negotiate your rate with your current lender. Understanding and potentially adjusting your existing loan, such as switching from interest-only to principal and interest repayments, can also help in securing a lower interest rate.
Changing your home loan product or switching lenders will require a refinance.
How do I ask my bank to lower my interest rate?
Asking your lender to reduce your home loan’s interest rate can be as simple as giving them a call. A home loan lender typically offers more competitive rates to new customers to attract them, so researching these rates online can be beneficial.
Talking to an Aussie Broker can help: we can talk to your lender on your behalf and bring our strong negotiation skills to potentially lower your repayments. Be aware of the implications of a variable interest rate, as it can lead to significantly higher payments once the initial fixed-rate period expires.
Here are 5 tips to help prepare you for an interest rate negotiation with your current lender:
1. Understand your current loan and financial position
Before you even think about asking if you can get an interest rate reduction, it’s smart to make sure you are the responsible borrower.
Having a history of late repayments, for example, will likely reduce your chances of getting a lower rate.
If you weren’t the perfect borrower in the past, it’s a good idea to take the time to work on making regular, on-time repayments so that you can justify requesting a lower interest rate.
Other things that can put you in an ideal position to haggle include:
Having a Loan to Value Ratio (LVR) of 80% or less
Having stable and full-time employment
Making principal and interest repayments, rather than interest only repayments
Having a good credit history
Being an owner-occupier
Factors that can reduce your negotiation power may include:
A poor credit score
Missed loan or credit card repayments
Having a high LVR (over 80%)
Being a riskier borrower (e.g. if you’re self-employed).
2. Check out your current lender’s interest rates
Before you request a lower rate, it’s smart to research and know what rates your existing lender is offering new customers.
If your current interest rate is lower than the rate new customers get, you’re probably not going to have much luck lowering yours even further.
But chances are, if you haven’t refinanced in a while and have been with your lender for some time, you may not have the most competitive rate.
This is particularly likely if you were previously on a fixed rate home loan that reverted to your lender’s standard variable rate at the end of your fixed term. These standard variable interest rates are often higher than average variable rates.
Banks are unlikely to offer loyal customers lower interest rates just out of the blue, so you’re going to have to make the first move.
Coming in with knowledge of your lender’s interest rates will make you feel more confident when negotiating and less likely to get ripped off.
3. Compare your lender’s rates with competitor interest rates
Knowledge is power when negotiating. Research current home loan rates from other lenders to see if you can get a better deal elsewhere. Look for:
Standard variable and fixed interest rates across different lenders.
Special offers, cashback incentives, or package deals.
Reviews and comparisons of lenders’ customer service and policies.
In addition to finding out your current lender’s interest rates, it’s not a bad idea to do some competitor research on better loan rates from other lenders before you chat to your lender.
Mortgage brokers can simplify this complex process and use their expertise to secure optimal mortgage deals tailored to your financial situation.
This gives you a better idea of what sort of interest rate you should have and how your current rate compares to the rest of the market.
When researching rates from other lenders, make sure you consider the following:
What kind of fees these lenders are charging on their home loans
That you are looking at the same type of home loan you currently have (e.g. if you have a variable rate investment loan, make sure you are comparing other variable rate investment loans)
Whether these competitor loans include the same/similar features (e.g. offset accounts) that could influence the rate charged.
Basically, to make an effective comparison with your home loan, you need to look at very similar competitor loans.
You might also stumble across a home loan with a lower rate, but on closer inspection it comes with higher fees. Always calculate whether these fees make the home loan more expensive than a slightly higher interest rate.
Comparison rates may be able to give you a more accurate picture of what a home loan will cost.
4. Ask for the rate that new customers get
We mentioned earlier that it’s important to find out what rates your lender is offering new customers. It’s very possible that these rates will be lower than your current interest rate.
If you have been the ideal borrower, with at least 20% equity in your home, you are in a decent position to ask for a reduced rate.
There are more lenders and banks than ever before and many lenders understand the importance of retaining customers and rewarding loyalty. So, you may find that your lender is willing to negotiate and reduce your rate if you are in a healthy financial position.
5. Take advantage of your customer loyalty
Your loyalty as a customer could be one of your greatest negotiation tools. If you’ve been with your lender for a long time and have a positive history with them, you may be able to use this to your advantage.
Come into the negotiation prepared and with the facts ready. You can tell them how many years you’ve been with them and prove your reliability as a borrower by highlighting your repayment history.
Starting the interest rate negotiation
At this stage, you should feel more prepared and confident to pick up the phone and call your lender (or visit one of their branches).
Here are some tips for the negotiation itself:
Be firm, polite and get straight to the point by saying that you would like a home loan interest rate reduction, for example: “I’ve been reviewing my home loan, and I’ve noticed that my current interest rate is higher than what’s available in the market. I’d like to discuss the possibility of securing a lower rate.” This is when you can start justifying your request by:
Explaining why you’re a responsible borrower
Comparing what you’re paying as a loyal customer to what new customers pay
Mentioning the lower rates competitors are offering (it’s better to bring this up later if they don’t buckle when you mention new customer rates).
Be persistent and follow up
Lenders don’t always say yes immediately. If your request is denied:
Ask for reasons and if there are any conditions under which they’d reconsider.
Check in again after a few weeks or months, especially if market rates shift.
Consider escalating your request to a manager or retention specialist.
What if my lender refuses to lower my interest rate?
If at the end of the negotiation they haven’t budged, it may be time to ask for a mortgage discharge form. This could be the final push they need to lower your rate.
Engaging a mortgage broker can potentially help in getting you access to better loan terms and rates. Mortgage brokers have access to multiple lenders, can negotiate on your behalf, and conduct regular reviews to ensure competitive mortgage rates, ultimately simplifying the process and maximising savings for borrowers.
By indicating that you are willing to switch lenders, they are forced to consider whether they want to lose you as a customer. In a saturated market, many lenders will be willing to trim down your interest rate to keep you.
By being prepared to switch lenders, you open up more opportunities for finding lower interest rates and loans that simply suit you better.
Don’t be afraid of refinancing your home loan either – this could be the opportunity to give it the facelift it deserves and find a lender more worthy of your time.
What if I’m not comfortable negotiating my interest rate?
How Aussie can help
Negotiating with banks can be time-consuming and overwhelming. That’s where Aussie comes in:
Expert mortgage brokers: our brokers negotiate with lenders on your behalf to secure a better deal.
Loan comparison: we compare hundreds of home loans to find the right fit for your needs.
Seamless process: from paperwork to approvals, we simplify the entire refinancing journey.
Negotiating a lower interest rate isn’t just possible, it’s a smart financial move.
By being prepared, doing your research, and leveraging expert help when needed, you can save thousands over the life of your loan.
If you need assistance, book an appointment with an Aussie Broker today and see how much you could save.
