Rate ‘wiggle room’ has given way to a secret mortgage discount war
Lenders are so desperate to stem the outflow of borrowers — refinancing hit a record $18.1 billion last month — that they are offering unprecedented interest reprieves. But everything happens behind closed doors, on a case-by-case basis.
All that is announced publicly is a reduction in the prices of basic home loan products, which do not come with clearing accounts.
Without a clearing account yourself, you either have such a mortgage with a larger lender or a mortgage with a non-bank online lender who cannot afford them. Either way, you could get an instant rebate on the variable interest portion of your loan.
For other readers, the best way to do this is to threaten to take your business to the cheapest loan in the market with an offset account: in the low 3% range. Anyone paying a fare that starts with 4 or 5 should consider jumping ship today.
However, your solution prevents you from leaving, so your best approach is to instead explain that you are a single mother who is now more cash-strapped, and you know that the 1 percentage point discounts for customers existing ones are common.
If successful, I would keep the repayment savings in a high interest savings account, so you can access them in case of emergency.
The thing is, pouring money straight into a home loan can act like a one-way trap, especially in times of crisis. Lenders can lock it in if you’re having financial difficulty, or even just recalculate your loan balance and subsume it.
At the end of your fixed rate term, you might consider refinancing to a product with a flexible clearing account because, at the near perfect time of your expiration, rates should to fall from the middle of next year.
And you’ll already have a head start without a mortgage.