Rate ‘wiggle room’ has given way to a secret mortgage discount war

Lenders are so desperate to stem an exodus of borrowers (refinancing soared to a record $18.1 billion last month) that they are offering unprecedented interest forgiveness. But everything happens behind closed doors, case by case.

All that is publicly announced is a drastic reduction in the prices of basic mortgage loan products, which do not come with compensation accounts.

Homeowners are turning away from the Big Four banks in search of better deals.

Homeowners are turning away from the Big Four banks in search of better deals.Credit:Paul Oak

Without a clearing account, you have such a mortgage with a larger lender or one with a non-bank online lender that can’t offer them. Either way, you could get an instant discount on your variable rate portion of your loan.

For other readers, the best way to do this is to threaten to take your business to the cheapest loan on the market with a compensation account: in the low 3 percent range. Anyone paying a fee that starts with a 4 or 5 should be thinking of jumping ship.

However, her solution prevents her from leaving, so her best approach is to explain that she is a single mother who now has less money and knows that 1 percentage point discounts for existing customers are common.

If you’re successful, I’d keep the refund savings in a high-interest savings account, so you can retain emergency access to it.

The thing is, paying money directly into a home loan can act like a one-way trapdoor, especially in tough times. Lenders can lock you in if you’re in financial difficulty, or even just recalculate your loan balance and subsume it.

When your fixed-rate term is up, you might consider refinancing a product with a flexible clearing account because, at near-perfect timing for its expiration, rates are forecast to fall from the middle of next year.

And you’ll already have a mortgage-free head start.

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