Investors have had a timely reminder this week not to get complacent about their loans.
A drop in wholesale interest rates has left banks more able to negotiate the rates they charge – and mainstream media has pounced on the fact that, with a bit of negotiation, almost everyone can knock something off the interest rate they are paying on the mortgages.
Some rates are below 5% and brokers report banks stumping up with cash to cover break fees and legal fees for clients they want to snare from other lenders. It now seems par for the course that banks will drop half a percentage point off most advertised rates.
The fact that banks are willing to negotiate should not come as a surprise to property investors. It’s not new. Banks have always offered better-than-advertised rates to good customers. A good relationship with the bank manager and a reasonably sizeable loan have generally virtually guaranteed at least some discount.
What has changed is that with the property market not growing as fast as it has in previous years, banks have noticed that if they want significant levels of new business, they need to get it from another lender.
They’re now more interested in nabbing established, valuable business from another bank and less focussed on attracting fresh borrowing.
Kiwibank is a prime example of this. They advertise how easy it is to switch to them and their advertised sub-5 per cent interest rate is only available to those with more than 30 per cent equity – obviously not most first-home buyers.
This is a welcome change for property investors, for whom the incentives advertised to entice first-time buyers often don’t hold much appeal.
Take the opportunity this month to compare what you’re getting from your bank against other lenders’ offerings. Your business is increasingly valuable – see what your bank will do to hold on to it.
