The Headlines Say “Doom and Gloom”. But Is It Really That Bad Out There In The Australian Property Market?

If you have been following the news lately, you could be forgiven for thinking the Australian mortgage market is heading into a very dark period. House prices are under pressure. Mortgage applications are falling. Borrowers are feeling the squeeze. Interest rates remain high, and there is plenty of speculation about what the Reserve Bank might do next. The headlines can make it sound as though banks are sitting back, waiting for borrowers to struggle. But there is another side to the story — and it is one that existing mortgage holders should pay very close attention to.

Banks and lenders are competing hard for good borrowers. And that competition can mean lower interest rates, sharper loan pricing, fee reductions and, in some cases, thousands of dollars in cashback incentives. The mortgage market isn't standing still. Recent data shows just how competitive the lending market has become.

While the major banks have reported significant falls in home-loan applications, smaller lenders are increasingly looking for opportunities to win business from them. Recent market analysis has identified dozens of lenders offering variable rates below 6%, while a growing number of lenders have been cutting rates specifically to attract new customers. 

Then there are the incentives. Cashback offers of $1,000, $2,000, $3,000 and even $4,000 are currently available on selected home loans, depending on the lender, loan size and eligibility requirements. In other words, while the news cycle is focusing heavily on the negatives, lenders are quietly fighting one another for customers. And that creates an opportunity.

Your bank may value keeping you more than you realise. One of the biggest mistakes a mortgage holder can make is assuming that their current interest rate is simply their rate. It isn't. Your lender has a range of pricing options, and the rate you are paying today may not be the best rate available to you. Banks know that refinancing is easier than ever. Borrowers can compare dozens of lenders, and mortgage brokers can approach multiple lenders on their behalf. That means lenders have a very real reason to retain existing customers. If you tell your bank you're considering refinancing, you may find that its retention team suddenly becomes very interested in keeping your business. That might mean a lower interest rate. It could mean reduced fees. It could mean a package discount. And sometimes, it can mean an incentive to stay.

Refinancers are a major target for lenders, with many current cashback campaigns specifically aimed at borrowers willing to move their existing home loan. For example, current market offers include cashback incentives worth up to $4,000 for eligible borrowers. And while $4,000 sounds attractive, the bigger opportunity could be the interest rate. A seemingly small difference in your mortgage rate can add up to thousands of dollars over time.

That's why a mortgage review shouldn't simply ask: “Who is offering the biggest cashback?” It should ask: “What is the best overall deal for my circumstances?”

Don't let the cashback distract you! Cashback sounds great — and it can be.

But it shouldn't be the reason you choose a mortgage. A $4,000 cashback offer isn't necessarily a good deal if the new loan has a significantly higher interest rate or expensive ongoing fees. The smarter approach is to look at the whole package:

1. Interest rate

2. Comparison rate

3. Loan fees

4. Offset account

5. Redraw facilities

6. Fixed or variable options

7. Loan features

8. Flexibility

9. Cashback or other incentives

10. The total cost of the loan over time

A mortgage that saves you $300 a month could potentially be far more valuable than a one-off $3,000 incentive. This is where having a mortgage broker in your corner can make a real difference. The “doom and gloom” headlines may be missing an important story. There is no denying that the Australian housing and lending market is facing challenges.

Don't wait for the RBA to save you! One of the most common approaches we see is:

“I'll wait and see what happens with interest rates.” But you don't necessarily need to wait for the Reserve Bank to cut rates to improve your mortgage position. A lender may be prepared to offer you a sharper rate today. Another lender may have a more competitive product. You may have built up additional equity in your property. Your financial circumstances may have improved since you originally took out your loan.

Or your current lender may simply be willing to sharpen its pricing when faced with the prospect of losing your business. The Reserve Bank's decisions matter, of course.

But your mortgage rate isn't determined solely by the cash rate. Lenders compete too.

And right now, that competition is worth paying attention to. So, what should you do?

If you haven't reviewed your mortgage recently, now could be a good time to find out what your options are. You don't necessarily need to refinance. You don't necessarily need to change banks.

And you certainly shouldn't switch loans purely because someone is offering cashback. But you should know what is available. A good mortgage broker can review your existing loan, compare it against the broader lending market and determine whether there is an opportunity to negotiate a better deal or refinance. Sometimes the best outcome is moving to another lender. Sometimes it's getting your existing lender to sharpen its rate.

And sometimes, your current loan is already competitive and the best decision is to leave it alone. The important thing is knowing which situation applies to you. So what’s the bottom line? The news might be talking about doom and gloom. But behind the headlines, lenders are competing for borrowers — and that competition can create opportunities. Lower rates, sharper pricing and cashback incentives are all signs that lenders want your business. So before assuming that your mortgage is as good as it can be, ask a simple question:

“If I were a new customer today, what deal could I get — and can my current lender match it?”

You might be surprised by the answer.

***Rates, fees and cashback offers are subject to lender eligibility criteria and can change without notice. A cashback offer isn't necessarily the cheapest option, so borrowers should consider the overall cost and features of any loan before making a decision. This article is general information only and does not constitute personal financial advice.***