Nick Bruining: Now’s best time to shop around for home loan relief as lenders start fighting for your business

The tide may be starting to turn for struggling homeowners, with nine lenders lowering their home mortgage rates in the past fortnight.

The moves come out-of-cycle from changes to the overnight cash rate by the Reserve Bank of Australia.

Most market experts predict the next move will be a rate reduction by the central bank, but not until later in the year.

Comparison website Canstar tracks interest rate movements from most mainstream lenders and reported that nine lenders had cut owner-occupier rates in the past two weeks. Most of the action has occurred in the fixed rate market.

Canstar group executive of financial services Steve Mickenbecker said it was becoming a borrower’s market.

“There are 19 variable and fixed rates below 5.75 per cent and 225 rates below 6 per cent — way below the average loan rate of 6.90 per cent,” Mr Mickenbecker said.

The pressure to trim rates has been brought on by intense competition between lenders seeking new business.

Frank Paratore, from Purple Circle Financial Services, said that lenders were also actively trying to take over existing loans, which was forcing rates lower across the board.

“They are out there, trying to pinch each other’s customers. This makes it a borrower’s market, so now is a great time to start weighing up your options,” Mr Paratore said.

Mr Mickenbecker said that borrowers should keep an eye on rates and compare them to what they are currently paying.

“Most borrowers don’t have to wait until the Reserve Bank cuts the cash rate to make savings,” he said.

Mr Paratore said those chasing mortgage relief should do their homework before contacting their current lender.

“Before you start haggling, know what rate you can get with a competitor and use that as your reference point. Many of them will price-match the rate, rather than lose an existing customer,” he said.

In the majority of cases, the best deals are being offered by the second-tier lenders or lenders who often distribute primarily through mortgage brokers or directly online.

But borrowers with less than 20 per cent equity in their property are unlikely to get the best deals.

Changing lenders, in this case, could see you paying premiums for new mortgage insurance which protects the lender if you default on the loan. You can’t transfer an existing insurance arrangement to a new lender. This can add thousands to the cost of changing lenders.

Mr Paratore said that if you are attracted by a low rate with a new lender, make sure you also consider the “revert rate”, which is the rate that applies when an introductory honeymoon period is over.

He said consumers should also understand that the legal requirements of mortgage brokers, who now cover 70 per cent of the market, are likely to leave borrowers in a much better position.

“Brokers have a legal obligation to act in a client’s best interests when recommending a mortgage,” he said,

“Lenders have no such ‘best interests’ obligation, which is why they won’t lower your rate unless you ask.”