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How to reduce your home loan interest rates right now

Updated: Nov 17, 2022

How do I reduce my interest rates?


The following are steps that you can take right now, to reduce your payable interest rate.


There are two ways to do this, and they are:

  1. Negotiate - with your current lender

  2. Refinance - Switch to a lender with better rates



In a way, negotiating a better rate with your bank, is a lot like asking for a pay rise with your employer. You need to be well armed with justifying why. Ask your mortgage broker to go into bat for you, if you don’t have one, please feel free to contact us.


Why should you pay lower rates?


1. Better rates elsewhere


Research other lender’s rates. If you are paying 5% and another similar lender out there is offering 4.5%, your bank should either match, or make you a better offer.


Competition is rampant at the moment, take note of not just lower rates, but cashback offers.


Make sure the bank you quote is comparable. For example, don’t go to CBA (one of the top 4) and say ‘Athena’ is offering cheaper rates.It likely won’t get you anywhere. It’s a little like going to a Toyota Hilux dealer, and requesting pricing similar to ‘Great wall’ dual cab. You just aren’t comparing apples with apples.


If you’re with CBA - Compare with Westpac, ANZ, NAB, Macquarie etc


If you’re with ME Bank - Compare with ING, Ubank, Suncorp, Virgin, Bankwest etc


You get the point - try to compare an apple with something close to another apple.


2. Property has risen in value


When you first purchased you property you may have borrowed 90% of the value. For example, 5 years ago you may have bought:


$1m property, with debt of $900,000. Your LVR would be 90%.


But now that property is worth $1.5m, and you’ve paid off $100,00 already:


$1.5m property, with debt of $800,000. Your LVR would be 53%


From a banks perspective, 90% LVR is far, far riskier than a 53% LVR. You should not be paying the same interest rate. So if your loan to value ratio is lower, that is a very useful weapon in your negotiation arsenal.


3. Better financial position


You might be in a better financial position now, than you were when you took out the loan. Things like:

  • Improved credit history - You may have a had some blemishes on your credit history when you took out the loan. But after a few years, these blemishes can drop off your record. If you have demonstrated better credit history, this can help your case.

  • Improved employment situation - Pay rises, flourishing business, partner back to work after maternity/paternity leave - all of these things can help make you less risky in the eyes of the bank, and less risky typically means bigger discount.

  • Reduced Debt - You may have reduced your credit card limits, paid off that car loan, wiped out your HECS. LEss debt means a lower Debto to Income ratio. Which again means you’re less risky in the eyes of the lender.


If you don’t have time to do this, a broker will. At Polaris Home loans, if we cannot help you, there is no charge whatsoever. Even if we can help you, there is no charge whatsoever, the bank pays us.


Either way leave us a message, call directly, or fill in our online form for a no cost, no obligation chat.

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