Unlock the secrets to knowing if your rate is too high

Your lender does not remind you when your rate becomes uncompetitive.

Most borrowers in Darling Point are sitting on rates that are between 0.30% and 0.80% higher than what they could access today, simply because they have not reviewed their loan in the past 18 months. The difference on a $1.2 million loan is roughly $300 to $800 each month, which over a year becomes a significant amount that could be redirected toward offset accounts, investment opportunities, or simply retained as cash flow.

How to Tell if Your Rate is Above Market

Your rate is too high if it sits more than 0.30% above what lenders are currently offering for the same loan type and deposit position. Pull out your most recent home loan statement and locate the interest rate listed under your account summary. Then compare that figure with current advertised rates for owner-occupier or investment loans depending on your property use. If your rate is 6.40% and lenders are advertising variable rates from 5.90% to 6.10%, you have room to move.

In our experience, self-employed borrowers often assume their rate will always be slightly higher due to perceived lending risk, but that is not necessarily the case anymore. Many lenders now assess self-employed applicants using the same pricing as PAYG borrowers once financials are verified. The gap that existed a few years ago has narrowed considerably.

Fixed Rate Borrowers Coming Off Their Term

Borrowers who fixed between late 2021 and mid 2022 are now rolling onto variable rates that can be 2.00% or more above their previous fixed term. If your fixed period ended recently and you have not actively chosen a new rate, you are now sitting on your lender's standard variable rate, which is almost always the highest rate they offer.

Consider a self-employed consultant in Darling Point who fixed at 2.19% on a $1.5 million loan and recently reverted to a standard variable rate of 6.89%. Monthly repayments jumped from roughly $5,600 to $9,400. Refinancing to a new lender at 6.09% brought repayments down to around $8,700, a monthly saving of $700. That outcome was achieved within six weeks by securing home loan refinancing with a lender who valued the borrower's two years of updated financials and strong repayment history.

What Counts as a Worthwhile Rate Reduction

A reduction of 0.30% or more is typically worth the effort and cost of switching lenders. Anything below that margin may not cover discharge fees, application costs, and the time involved unless you are also restructuring your loan for other reasons such as accessing equity or consolidating debt.

Discharge fees range from $300 to $500 depending on your current lender. If you are on a fixed rate and exiting early, break costs can apply, although these are often lower than borrowers expect when rates have risen since the loan was taken out. If you are unsure whether break costs apply or how much they might be, contact your lender directly or ask us to request a payout figure on your behalf.

Why Lenders Do Not Automatically Lower Your Rate

Lenders make more margin on borrowers who do not call and ask. Your loan is priced at the rate you agreed to when you settled, and unless you actively request a reduction or threaten to switch lender, that rate stays in place regardless of market movement.

Some lenders will reduce your rate if you call their retention team and mention you are considering refinancing. Others will not move at all and would rather let you leave. If your lender offers a reduction, compare it against what you could access by moving. A 0.15% reduction might sound helpful, but if another lender is offering 0.50% lower, you are still leaving money on the table.

The Role of Loan-to-Value Ratio in Rate Pricing

Your rate is partly determined by how much equity you hold in the property. Borrowers with less than 20% deposit generally pay a higher rate due to the lender's higher perceived risk. If you have paid down your loan or your property has increased in value since you first borrowed, your loan-to-value ratio has improved, which can give you access to lower interest rate options.

A working professional in Darling Point with a loan balance of $900,000 on a property now valued at $2.1 million has an LVR below 45%. That equity position opens access to rates typically reserved for low-risk borrowers, often 0.20% to 0.40% below standard pricing. Refinancing in this scenario not only reduces the rate but can also remove any remaining lender's mortgage insurance charges that may have been capitalised into the original loan.

How Often You Should Review Your Rate

Check your rate every 12 to 18 months, particularly if you have not spoken to your lender or broker during that time. Set a calendar reminder for the anniversary of your settlement or link it to your tax return preparation if you are self-employed, so it becomes part of your annual financial review.

If your fixed rate is due to expire within the next three months, start the conversation now rather than waiting until the week before. Lenders need time to assess your application, and if you are self-employed, they will request updated financials, which can take a few weeks to prepare depending on your accountant's availability.

When Refinancing May Not Make Sense

If you are planning to sell within the next 12 months, the cost and effort of refinancing may outweigh the short-term saving. Similarly, if your loan balance is below $300,000 and the rate difference is only 0.30%, the dollar saving may not justify the administrative effort involved.

Refinancing is also less appealing if your financial position has worsened since you first borrowed. Lenders assess your current income, liabilities, and credit file when you apply to refinance. If your circumstances have changed and you no longer meet serviceability requirements, you may not be approved at a lower rate, even if one is technically available in the market.

What to Bring When You Are Ready to Compare Rates

Have your most recent home loan statement, the last two years of tax returns if you are self-employed, and recent payslips if you are PAYG. Lenders will also want to see your current offset or savings balance and details of any other debts such as investment loans, car finance, or credit cards.

If you hold multiple properties, bring statements for all loans so we can assess whether refinancing one, some, or all of them delivers the most meaningful outcome. In some cases, refinancing your owner-occupied loan while leaving your investment loan in place makes sense. In others, consolidating everything under one lender reduces your rate and simplifies your monthly administration.

Call one of our team or book an appointment at a time that works for you. We will pull a current comparison based on your loan size, property location, and income structure, then walk you through what the rate reduction looks like in dollar terms across the next 12 months and beyond.

Frequently Asked Questions