Top Tips for Negotiating a Lower Interest Rate with Your Lender

When it comes to home loans, even a modest reduction in your interest rate can save you tens of thousands of dollarsover the life of your mortgage. The good news? You don’t have to wait for your lender to offer a better deal — you can ask for one.

Negotiating your rate isn’t as intimidating as it sounds. With the right approach, research, and preparation, many borrowers successfully secure lower rates or switch to more competitive loans.

In this guide, you’ll find expert strategies to help you negotiate more effectively, understand your current loan, and make smart moves that could lead to serious long-term savings.

1. Understand Your Current Loan

Before entering any negotiation, get familiar with the fine details of your existing mortgage. Key elements to review include:

• Your current interest rate (fixed or variable)
• Comparison rate — this includes fees and gives a better indication of true cost
• Loan term and features — such as offset accounts, redraw facilities, or repayment flexibility
• Exit or break fees — what it could cost to switch lenders or refinance

Knowing this information shows your lender you’ve done your homework and positions you as an informed borrower.

2. Compare Current Market Rates

Use online comparison tools, mortgage broker insights, and industry reports to benchmark your loan against others in the market.

Example:
If you’re currently on a 6.0% interest rate but other lenders are advertising 5.5% or less, you have a clear point of negotiation.

Keep an eye out for:

• Special offers or cashback deals for refinancers
• Introductory rates (but understand the reversion rate afterward)
• Rates for similar loan types with your LVR and loan amount

This research gives you real leverage when negotiating with your lender.

3. Know Your Credit Score

A strong credit score improves your negotiating power. Lenders assess your creditworthiness before adjusting your rate or approving a refinance.

You can access your credit report for free from providers like:

• Equifax
• Experian
• Illion

To boost your score:

• Pay bills on time
• Reduce credit card balances
• Avoid multiple credit applications within a short timeframe

Highlighting your strong credit history during negotiations demonstrates you’re a low-risk borrower worth keeping.

4. Build a Strong Case

Lenders are more likely to offer a discount if you can present a compelling argument. Strengthen your position by highlighting:

• Customer loyalty: If you’ve been with the lender for years and have a clean repayment history
• Low LVR: A lower loan-to-value ratio reduces risk for lenders. If your property has appreciated and you’ve paid down the principal, mention it.
• Market competition: Quote better rates or terms from other banks
• Income stability: Secure employment and consistent income adds credibility

Example:
If your loan started at $400,000 (80% LVR) and your property is now worth $600,000, your LVR is approximately 67% — a much stronger risk position in the lender’s eyes.

5. Ask to Speak with the Retention Team

When contacting your lender, request to speak directly with the retention or mortgage discharge team. These teams are trained to keep customers from switching and often have the authority to offer competitive discounts.

How to frame the conversation:
“I’ve been offered a 5.4% rate by another lender. I’d like to stay with your bank if you can match or beat that rate.”

Be respectful, professional, and confident — this is a standard conversation in lending, not a confrontation.

6. Be Prepared to Walk Away

The most powerful tool you have is your ability to leave.

If your lender won’t offer a competitive rate, explore refinancing with another bank or non-bank lender. While refinancing comes with upfront costs (such as discharge fees, application fees, or valuation costs), the long-term savings can often outweigh these.

Example:
Reducing a $500,000 loan from 6.0% to 5.5% over 30 years could save you over $47,000 in interest.

To demonstrate your intent:

• Request a loan discharge form
• Mention you’re actively comparing offers

This often triggers a better counter-offer from your current lender.

7. Use a Mortgage Broker

A broker can be a valuable ally when negotiating a lower rate — especially if you’re not confident handling the discussion yourself.

Brokers can:

• Access a wide range of lenders (including non-public offers)
• Compare products tailored to your circumstances
• Negotiate on your behalf
• Highlight hidden fees or restrictive clauses in loan terms

Choose an accredited broker and ask for clarity around their fees or commissions before proceeding.

8. Explore Package Discounts

Many lenders offer home loan packages that bundle other products (like credit cards, transaction accounts, or insurance) in return for a discounted interest rate.

Example:
A 0.5% discount on a $400,000 loan saves $2,000 per year, which can easily offset an annual package fee of around $395.

Ask your lender whether you’re eligible for a professional package or bundled deal that includes a rate discount.

9. Consider Splitting Your Loan

If you’re unsure whether to fix or stay variable, a split loan allows you to do both. Fixing part of your loan gives you repayment certainty, while the variable portion offers flexibility.

Some lenders offer special discounts or flexible features on split loans, so don’t hesitate to negotiate the rate on both components.

10. Highlight Extra Repayments

If you’ve been paying more than the minimum each month, make sure your lender knows. This signals:

• Strong financial discipline
• Commitment to reducing your loan
• Lower credit risk

Example:
If you’ve paid an extra $500 per month on a $500,000 loan, you could save over $90,000 in interest and shorten the loan term by several years.

This behaviour strengthens your case for a lower rate.

11. Track the RBA Cash Rate

Interest rates typically follow movements in the RBA’s official cash rate. If the cash rate has dropped but your lender hasn’t passed on any savings, it’s time to ask why.

Use this as an opportunity to request a rate review.

Example:
If the RBA lowers the cash rate by 0.25% and your lender holds firm, you have every reason to ask for a matching reduction.

12. Avoid Complacency

One of the biggest mistakes borrowers make is staying with the same lender for years without reviewing their rate.

Lenders often reserve the best deals for new customers, leaving loyal borrowers on less competitive terms. Make it a habit to:

• Review your mortgage annually
• Set calendar reminders to compare rates
• Call your lender regularly for a review

13. Don’t Give Up Too Soon

Negotiating a lower interest rate can take more than one phone call. If you’re not successful the first time:

• Try again with updated competitor rates
• Reassess your eligibility after improving your credit score or LVR
• Contact a different department or escalate the issue

Persistence pays off — especially when the potential savings are this significant.

Final Thoughts: Take Control and Save

Negotiating a lower interest rate doesn’t require luck — it requires preparation, persistence, and the confidence to advocate for your financial wellbeing.

Whether you stick with your current lender or refinance with a competitor, the goal is the same: reduce your mortgage costs and build wealth faster.

Your next steps:

• Understand your current loan
• Compare market offers
• Present a strong case
• Ask the right people
• Be ready to switch if needed

Even a small rate reduction today can translate into five-figure savings over the life of your loan. So don’t wait — take action now and make your home loan work harder for you.