A new survey commissioned by financial services comparison site Mozo found that seven in 10 borrowers have successfully negotiated their way to a lower interest rate.
Of the 1,409 respondents, 38 per cent were able to score a better interest rate in the last two years, cutting on average 0.5 per cent.
According to Mozo director Kirsty Lamont, this represents more than $36,000 in savings over the course of a 30-year, $350,000 principal and interest loan, which she said was “a significant windfall considering how long it takes to pick up the phone and ask your lender for a better deal”.
However, two-thirds of existing mortgagors have not attempted to negotiate an improved rate in the last two years, the study found.
As lenders tend to offer more attractive interest rates to new customers, with loyal customers often stuck with originally established rates, Ms Lamont said that “a large chunk of borrowers could be getting some serious savings simply by picking up the phone”.
According to Mozo, consumers are more comfortable bargaining for better prices on appliances in stores than their home loan.
“Our results are a glimmer of hope to those borrowers who might have thought haggling with their lender is too intimidating or too difficult. There is a relatively high chance of success if you simply ask,” Ms Lamont said.
At present, 44 per cent of mortgagors are on a home loan rate above 4 per cent, even though more than half of the lenders in Mozo’s database offer a rate under 3.7 per cent.
The comparison site has three key pieces of haggling advice for borrowers: ask lenders for more even when they come back saying that’s the best they can do; negotiate for more than just a rate discount such as cash backs or frequent flyer points; and price-match with competing lenders so that the lender is more inclined to come to a compromise.
In April, Mozo announced that its comparative analysis of 525 home loans from 88 lenders found that the average borrower can save $2,596 a year on repayments by switching to a competitive online lender, which Ms Lamont said indicates that online lenders have been “competing more fiercely in the home loan space”.
The saving amount was up by 15.4 per cent from the $2,250 in potential annual savings recorded last year.
The director additionally noted at the time that online lenders are on average 0.73 per cent cheaper than the major banks for a typical loan of $300,000 over 30 years. This translates to a reduction of $1,541 in interest per year.
However, Mozo’s study also showed that Australians are less likely to apply for a home loan online compared to other financial products.
More than 50 per cent of borrowers were found to be comfortable applying online for car insurance, credit cards and personal loans, while only 27 per cent would consider taking out a home loan online.