Your interest rate might be costing you more than it should.
Many Perth homeowners stay with the same lender for years without checking whether their rate still reflects what's available in the market. Rates don't just climb when the Reserve Bank moves, they also drift upward as lenders prioritise new customers over existing ones. If you haven't reviewed your home loan in the past 12 months, there's a strong chance you're paying more than you need to.
How to Check if Your Rate Is High
Compare your current rate to the advertised rates for similar loan products from other lenders. If your rate sits more than 0.30% above what new borrowers are being offered for the same loan type, deposit level, and repayment structure, you're likely paying too much. This gap compounds quickly. On a loan balance of $500,000, a 0.50% difference adds around $2,500 per year to your repayments.
Your loan type matters too. Variable rates for owner-occupiers paying principal and interest typically sit lower than investment loans or interest-only products. If you're on a standard variable rate and haven't negotiated in several years, the gap between what you're paying and what's available can stretch beyond 1.00%. A loan health check gives you a clear view of where your rate sits relative to the market.
Why Lenders Raise Rates for Existing Customers
Lenders compete hard for new business but rarely extend the same offers to customers who stay put. Over time, your rate can creep up through small adjustments that don't make headlines but add up across the life of the loan. This isn't accidental. Lenders assume that most borrowers won't act, so they reserve their sharpest pricing for acquisition, not retention.
In our experience, borrowers who refinanced in Perth over the past two years have commonly reduced their rate by 0.60% to 0.80% without changing loan features or taking on additional risk. That reduction translates to lower monthly repayments and, depending on how you structure the new loan, either more cash flow or a shorter loan term.
Fixed Rate Expiry and What Happens Next
If your fixed rate term recently ended, your loan has likely reverted to your lender's standard variable rate. That reversion rate is almost always higher than the discounted variable rates offered to new customers. The jump can be significant, sometimes more than 1.00%, depending on when you locked in your fixed term.
Consider a borrower in Scarborough who fixed at 2.29% three years ago on a $600,000 loan. When the fixed term expired, the loan reverted to a standard variable rate of 6.50%. Monthly repayments increased by over $1,400. Instead of accepting the reversion, the borrower refinanced to a new lender at 5.89%, cutting the repayment increase in half and retaining an offset account that wasn't available on the original loan. The entire process took three weeks.
If you're coming off a fixed rate, don't wait for the reversion to hit. Start the conversation with a mortgage broker at least 90 days before your fixed term ends so you have time to compare options and lock in a new rate before the old one expires.
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Book a chat with a Mortgage Broker at Mortgage Broker Perth today.
What Refinancing Actually Costs
Refinancing involves discharge fees from your current lender, application fees with the new lender, and valuation or settlement costs. Discharge fees typically range from $300 to $500. Application fees vary, though many lenders waive them during promotional periods. Valuation costs depend on property type and location but generally sit between $200 and $400 for standard residential properties in Perth.
If you're leaving a fixed rate loan early, break costs may apply. These costs reflect the lender's loss from you exiting a fixed term before it ends. The calculation depends on the difference between your fixed rate and the current wholesale rate for the remaining term. Break costs can range from negligible to several thousand dollars, so it's worth running the numbers before making a move. A refinance broker can obtain a break cost estimate from your lender and factor it into the overall comparison.
Even with these costs, refinancing to reduce your rate often pays for itself within the first year. On a $500,000 loan, a 0.50% rate reduction saves around $2,500 annually. If your total refinancing costs are $1,500, you're ahead within eight months.
How to Negotiate With Your Current Lender
Before you commit to refinancing, contact your existing lender and ask what rate they can offer. Have specific numbers ready. Know what other lenders are advertising for your loan type, and be clear about your loan balance, property value, and repayment history. Lenders are more likely to negotiate if you present a credible alternative.
Some lenders will match or come close to external offers, particularly if you have a strong repayment record and equity above 20%. Others won't budge, especially if you're dealing with a retention team that has limited pricing authority. If the offer doesn't bring you within 0.20% of what you could access elsewhere, refinancing is likely the more effective option.
Negotiation works for some borrowers, but it's not a long-term solution. Even if your lender reduces your rate now, there's no guarantee it won't drift upward again within 12 months. Refinancing gives you a defined rate, a clear comparison, and often access to features or offset arrangements that aren't available on legacy products.
When a Lower Rate Isn't the Only Factor
Rate isn't everything. A loan with a slightly higher rate but a full offset account can outperform a lower-rate loan without one, depending on how much you keep in the offset. Redraw restrictions, annual fees, and repayment flexibility all affect the true cost of a loan.
Some lenders charge monthly fees that erode the value of a lower rate. Others restrict additional repayments or charge for redraw. If you're comparing a loan at 5.79% with a $395 annual fee to one at 5.89% with no fee, the second option costs less over 12 months on most loan balances above $200,000.
Look at the comparison rate, which factors in fees and gives a clearer picture of total cost. But don't rely on it entirely. The comparison rate assumes a $150,000 loan over 25 years, which may not reflect your situation. If your loan balance is higher or your intended loan term is shorter, run the numbers based on your actual scenario.
How a Mortgage Broker Helps You Compare
A mortgage broker accesses rates and loan structures from multiple lenders, including some that don't advertise directly to the public. That access means you're not limited to the four or five brands you see most often. In Perth's current market, small and mid-tier lenders often price more sharply than the major banks, particularly for borrowers with equity above 20% and steady income.
Brokers also manage the application process, coordinate valuation and settlement, and handle the paperwork that comes with switching lenders. If you're refinancing to reduce your rate while juggling work and family commitments, that support makes a practical difference. You're not chasing documents, following up with lenders, or trying to interpret credit policy on your own.
There's no cost to you for using a broker. Lenders pay the broker once the loan settles, and the rate you receive is the same whether you apply directly or through a broker. In many cases, brokers secure better rates because they know which lenders are competing hardest for specific borrower profiles.
Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare it to what's available across the market, and walk you through the numbers so you can decide whether refinancing makes sense for your situation.
Frequently Asked Questions
How do I know if my interest rate is too high?
Compare your current rate to advertised rates for similar loan products from other lenders. If your rate is more than 0.30% above what new borrowers are being offered for the same loan type and deposit level, you're likely paying too much.
What happens when my fixed rate term ends?
Your loan reverts to your lender's standard variable rate, which is almost always higher than discounted rates offered to new customers. The jump can be significant, sometimes more than 1.00%, so it's worth reviewing your options before the fixed term expires.
How much does it cost to refinance?
Refinancing typically involves discharge fees of $300 to $500, valuation costs between $200 and $400, and sometimes application fees. Even with these costs, refinancing to a lower rate often pays for itself within the first year.
Can I negotiate a lower rate with my current lender?
Yes, you can contact your lender and ask for a rate reduction, especially if you have a strong repayment record and equity above 20%. Have specific numbers ready and be clear about what other lenders are offering.
Is the interest rate the only thing that matters?
No, other factors like offset accounts, annual fees, redraw restrictions, and repayment flexibility affect the true cost of a loan. A slightly higher rate with a full offset account can sometimes outperform a lower rate without one.
