mortgage interest rate

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tcpdump

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#66583 20-Aug-2010 09:36

Hi,

I was wondering what will happen if I take a mortgage and I negotiate a lower interest rate (likely to be minus 0.1% than the one advertised). To be more exact ASB has a 6% floating rate and Kiwibank have 5.9%.
Considering I already have everything with ASB I might as well go with them. They said they "will try to match the Kiwibank interest rate". That's fine by me but what will happen when the interest rates will go up for example with 1%?
Will I be on the "normal" 7% ASB rate or my 0.1% discount will still apply?

Anyone ever had this situation before?

Thanks.

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#370203 20-Aug-2010 09:40

yes.
I had a discounted variable rate with westpac. when the variable rate went up my rate went up to the standard variable rate, rather than the new rate less discount

Can't say if that will be the case with ASB though.

tcpdump

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#370206 20-Aug-2010 09:42

I thought that would be the case.
I'm not sure why but I'm a bit reticent of going with Kiwibank for my mortgage.
Can't give a reason for this although they have the lowest one at the moment but they might not sustain it on the long term and if somebody buys them for sure they won't be the cheapest anymore.

Am I too paranoid?

eracode

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#370215 20-Aug-2010 10:04

I think you should just ask ASB the question point blank and, if they say they will continue to apply the discount regardless of changes in their published variable rate, ask them to put it in writing. Then you have something to fall back on if the discount disappears next time their variable rate changes (which usually happens very soon after the Reserve Bank makes a change to the Official Cash Rate). The RBNZ reviews the OCR every six weeks (but doesn't necessarily change it each time).

Sometimes I just sit and think. Other times I just sit.

wallop

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#370216 20-Aug-2010 10:05

I'm with national and pretty sure that in the past the discount was continued. Depends what the contract says. Have you asked the ASB?

tcpdump

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#370218 20-Aug-2010 10:06

Not yet but I'll do it and ask them to put it in writing in the contract.

Thanks for all your answers.

bazzer

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#370220 20-Aug-2010 10:12

When I first got my mortgage I had a 0.5% discount off the advertised floating rate, whatever that was. This kind of discount is not so widespread these days because their "margins are tighter".

To be honest, 0.1% is not that big a deal. It is $600/year on a $600K mortgage (and yours might be less than that). OK, $600 is a decent amount per year and I'd like to save that too, but when you consider you're already paying $35,400/year interest, would you really notice the $600?

I got ASB to match Kiwibank once, but you can't expect this to be the same going forward. If you want to switch to Kiwibank because they are the cheapest, go for it but also expect that they may charge you for things in future that ASB would waive (refix fee etc).

In the end, go with the bank you like. Over the long term, things don't work out that different.

P.S. Where are you seeing <6% mortgage rates?

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mule

209 posts

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#370221 20-Aug-2010 10:13

tcpdump: I thought that would be the case.
I'm not sure why but I'm a bit reticent of going with Kiwibank for my mortgage.
Can't give a reason for this although they have the lowest one at the moment but they might not sustain it on the long term and if somebody buys them for sure they won't be the cheapest anymore.

Am I too paranoid?

Yep far too paranoid - I have been with Kiwibank for over 5 years with my mortgage, they have been brilliant and very easy to deal with. And they constantly have the lowest interest rates, so I win there as well.

eracode

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#370222 20-Aug-2010 10:13

If you are a good exisiting ASB customer (i.e. pay on time and no unarranged overdrafts, have adequate income to cover loan payments, not borrowing more than 80% of the value of your home etc) you should be able to negotiate a discount of more than 0.10% pa. The banks' margins on variable rates are very respectable right now and they can afford to give up more. Especially if you say you are thinking of going to another bank - they will give you a discount to retain your accounts. A floating rate discount of 0.50% pa is not uncommon.

Same applies if you are new to ASB - they will give you a discount to get you on board with them.

You should also be able to negotiate discounts off their fixed home loan rates too.

Sometimes I just sit and think. Other times I just sit.

tcpdump

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#370225 20-Aug-2010 10:16

bazzer:
P.S. Where are you seeing <6% mortgage rates?

I saw them 2 weeks ago :(

I see they have been increased to 6.15% - 6.25%

bazzer

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#370228 20-Aug-2010 10:19

tcpdump:
bazzer:
P.S. Where are you seeing <6% mortgage rates?

I saw them 2 weeks ago :(

I see they have been increased to 6.15% - 6.25%

Get used to it! ;)

Also, if you have a good LVR you may be able to negotiate harder.

tcpdump

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#370229 20-Aug-2010 10:19

eracode: If you are good exisiting ASB customer (i.e. pay on time and no unarranged overdrafts, have adequate income to cover loan payments, not borrowing more than 80% of the value of your home etc) you should be able to negotiate a discount of more than 0.10% pa. The banks' margins on variable rates are very respectable right now and they can afford to give up more. Especially if you say you are thinking of going to another bank - they will give you a discount to retain your accounts. A floating rate discount of 0.50% pa is not uncommon.

Same applies if you are new to ASB - they will give you a discount to get you on board with them.

You should also be able to negotiate discounts off their fixed home loan rates too.

Thanks for the hint. I am with ASB since almost 2 years ago and have no overdrafts and pretty much everything with them (salary, contents insurance, car insurance, credit card etc).

Is it worth going to a mortgage broker? I heard that they usually are able to negotiate better. If so, any recommendations?

Thanks.

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tcpdump

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#370234 20-Aug-2010 10:23

bazzer:
Get used to it! ;)

Also, if you have a good LVR you may be able to negotiate harder.

I will probably put at least 20% (maybe 25%) deposit on a $500-600k loan. (hopefully closer to $500k than $600k) :)

eracode

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#370241 20-Aug-2010 10:34

tcpdump:
eracode: If you are good exisiting ASB customer (i.e. pay on time and no unarranged overdrafts, have adequate income to cover loan payments, not borrowing more than 80% of the value of your home etc) you should be able to negotiate a discount of more than 0.10% pa. The banks' margins on variable rates are very respectable right now and they can afford to give up more. Especially if you say you are thinking of going to another bank - they will give you a discount to retain your accounts. A floating rate discount of 0.50% pa is not uncommon.

Same applies if you are new to ASB - they will give you a discount to get you on board with them.

You should also be able to negotiate discounts off their fixed home loan rates too.

Thanks for the hint. I am with ASB since almost 2 years ago and have no overdrafts and pretty much everything with them (salary, contents insurance, car insurance, credit card etc).

Is it worth going to a mortgage broker? I heard that they usually are able to negotiate better. If so, any recommendations?

Thanks.

You're on to it - I was going to say before: if you have multiple products with them (insurances etc) - what the banks call "cross sell" - you have a particularly strong case when asking for discounts. You are a desirable customer and they won't want to lose you. You are a loyal customer because you have all of your financial stuff with them.

I don't beleive in mortgage brokers - I think they get in the way of the personal relationship that a good customer should have with their bank. Bank and Customer loyalty is a two-way thing and brokers don't help wiith that. Deal with the bank yourself and play to your strengths.

Sometimes I just sit and think. Other times I just sit.

NonprayingMantis

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#370243 20-Aug-2010 10:41

one other thing to note. having your mortgage with your bank also makes adminny type things a hell of a lot easier.

I love being able to login to my online banking and see my mortgage at the exact same time.

Might be worth going to a broker to see what they can offer, then take that offer to your bank and aks them to match it. they probably will.

I just refixed my mortgage with westpac and after requesting it they offered to match kiwibanks 2 yr fixed rate.

Jaxson

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#370251 20-Aug-2010 10:49

My 2 cents....

Some banks work with mortgage brokers, some don't. I think people well over believe in Bank loyalty and personally I have found brokers able to do a better deal than one I've managed to get a quote on personally. They don't cost you and don't hurt.

Having just been raped by my bank I would like to point out a few things. If circumstances change and you are forced to sell/move then you will need to pay a break fee for any outstanding time left on a fixed agreement. Kiwibank have very low interest rates, but look a bit closer at their break fees, which can apply even if you are looking to transfer to another property.

Also any conditions from when you took out the mortgage may not apply later when you want to transfer the mortgage.

Now this is not likely to affect most people, but I don't think it hurts to point out that there is more to the mortgage contract than just a % rate. And no I don't think you are being paranoid, a mortgage ties you down and it pays to know your way around the ins and outs of the contract.

If you work for a major company then check if they have any deal with the bank too. Employee packages can save you a bit too. Also, if you can't drop the rate, then look to address the addon costs banks try to pass off. ie will they assist with legal fees when purchasing, and definitely no account fees etc. All the best.

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