There's been a lot of talk in this past week about mortgage rates.
Banks are becoming a lot more competitive in the interest rates they offer and people who ask for a better deal are finding their home loan rates being cut by up to half a percentage point. Advertisedrates are roughly 5.5 per cent for a two-year fixed term - but people have reported getting that down as low as 5.1.
This is happening for a couple of reasons. The wholesale rates that banks pay have dropped, partly because of turmoil in the international markets.
Banks are also having to compete with each other a lot more than they used to. Because the property market isn't growing as fast as it was in the last part of the past decade, banks that want new business have to take it from somewhere else. There aren't as many first-home buyers signing up for new loans - so banks have to try to convince existing mortgage-holders to switch.
You can use this situation to your advantage. Call your bank and see if you can get a better interest rate. I've heard of people doing this when they want a higher rate on a term deposit, too - so it's not just about debt.
It may also be worth seeing what sweeteners they'll throw in. The bigger your debt, the more valuable you are (provided you can pay it off, of course). If you're a property investor or you have a large home loan, you may find with a bit of persuasion, your bank can be convinced to pay the legal fees that come with switching banks or even the dreaded break fees that borrowers get stung with when they try to break a fixed-term loan before time.
At the moment, it does seem that borrowers have quite a bit of power. Ring your bank manager today and check that you're getting the best deal possible. Even a small saving in your interest rate can add up to substantial amounts of cash over the term of a loan.
But my advice at the moment would be not to use those savings to spend up large. Rates can rise just as quickly as they fall.
