Borrowers pay the price of mortgage awkwardness
Former banker Leighton Roberts estimates just one in 10 people with a mortgage negotiate a discount with their bank.
Roberts, now with the Sharesies investment business, used to manage a book of bank mortgages, and said a majority of borrowers won’t negotiate.
Hard bargainers could get up to 100 basis points off a floating rate loan (for example, dropping a rate from 5.95 per cent to 4.95 per cent), Roberts said, and 10-25 basis points off a fixed rate loan.
It wasn’t ignorance that stopped some borrowers from negotiating, he said. Many people were aware they could negotiate with their bank, but didn’t do so because they felt uncomfortable.
‘‘Most people have heard of their friends negotiating, but the awkwardness of pushing for a discount stops them,’’ he said.
Many people mix and match their loans, with some on floating rate, some on fixed, and the savings that a good negotiator can secure are worth the effort.
A $300,000 mortgage at 5.95 per cent floating rate would cost $825 a fortnight.
At 5.45 per cent, it would be $780 a fortnight. Mortgage brokers say Roberts is being a bit optimistic on the discounts available. Karen Tatterson from Loan Market said negotiating 25-50 basis points off a floating rate loan was good going, and on fixed rate loans the discounts available were in the range of 10-20 basis points.
The banks had ‘‘taken some of the bargaining off the table’’ by instituting a series of ‘‘specials’’ which could fool borrowers into thinking they were getting such a good rate that there was no room for bargaining.
Rather than seeing them as special, borrowers should see them like retailers’ ‘‘sale prices’’, Tatterson said.