How mortgage brokers work to negotiate interest rates

Don’t assume interest rates are always non-negotiable. Many home buyers mistakenly believe that interest rates are firm numbers set by market factors they don’t understand.

Even seasoned buyers often settle for higher interest rates than they’d like. Why do they cave? Because they either assume rates are set, or become frustrating working directly with lenders.

Fortunately, mortgage brokers can help. Confident negotiators, guided by expert knowledge, brokers work with you to try to get a better rate.

How do brokers save you time and money?

The right adviser is an essential piece of the mortgage process. From start to finish, brokers help you by:

• Organising your finances and determining what you can borrow
• Drafting a loan
• Submitting the loan to the right lenders
• Corresponding and negotiating with banks
• Helping you understand your mortgage

If you apply for a mortgage directly, you might spend a lot of time struggling with the process. If the loan is rejected, you’re back to square one. Brokers eliminate this hassle by working with several lenders simultaneously.

Brokers do the haggling, so you don’t have to.

What strategies do brokers use?

Confident buyers might want to go it alone, but brokers come with experience, clout and a number of resources to shave down your rate.

• They’re market experts – The value of outstanding residential mortgages in Australia tops $1.5 trillion, according to Deloitte’s 2016 Mortgage Report. It’s a broker’s job to follow the market and keep track of some of different lending products on the market. Banks want brokers to sell their products as well, so when a new loan comes out, brokers often know about it first.
• They work with a lender panel – Brokers have leverage because banks know they’ll leave. They play different banks against each other to get the right rate.
• They have the right tools – Good brokers constantly train to understand lending products and the art of negotiation. They also often have access to comparison software, financial planning tools and – if you’re lucky – discounts. Because banks want to push their loans, they’ll often offer brokerages incentives.

There’s more to a good mortgage than a low interest rate, but even a minor reduction can save you a considerable amount. If you owe $500K on a 10 year term with a 5 per cent p.a. rate, for example, you could save thousands in mortgage repayments by negotiating the right down to just 4.75 per cent p.a.