Request a reduction or refinance to a new lender, broker association boss suggests
As the Reserve Bank of Australia (RBA) meets today to decide the next move on monetary policy, the Finance Brokers Association of Australia (FBAA) has outlined two key steps brokers should take to ensure their clients secure the best possible home loan terms.
FBAA managing director Peter White (pictured) warned brokers to keep an eye out for the ‘lender loyalty tax’, whereby lenders offer sharper rates and discounts to new customers while leaving long‑standing borrowers at higher rates than they deserve.
White said that while brokers understand the system well, many borrowers who have ridden out multiple rate changes have no idea whether the rate they’re paying is still the best available.
“They don’t know that lenders often incentivise new business by offering lower rates to new customers than they provide to existing customers,” said White.
In the lead up to today’s decision, all major banks expect a 25-basis-point rate hike, which would be a dramatic 180-degree pivot from the Monetary Policy Board following three rate cuts in 2025.
But with inflation continuing to smash expectations and an incredibly tight employment market, consensus says the Board has no way to move but up.
White continued: “While many brokers are very proactive and regularly review rates for customers, when rates are expected to rise – either today or soon – we are presented with an opportunity to provide another level of service and if we are smart, lock in customers for life.
“Let’s tell them about the ‘lender loyalty tax’ and suggest they take two simple steps to be certain they have the lowest repayments on offer.”
White advised brokers to begin by contacting customers with the most competitive rates on the market and, where these are lower than what the client is currently paying, advise them to immediately call their lender and request a reduction.
He noted that many borrowers don’t realise they can renegotiate their rate during the life of the loan, “so it’s our role to educate them”.
“If the lender won’t budge, step two is for the broker to help the customer refinance at the lower rate,” he continued.
White noted that brokers can be a crucial support for clients in a rising rate environment, as even a small 0.25% cash rate increase will add about $115 a month to repayments on a $700,000 loan, with even larger jumps on bigger mortgages.
The Board is expected to announce its decision at 1.30pm this afternoon.
