About to refinance, current bank called to drop rate by 1.1%

Hi Guys,

Going through the process of refinancing and equity extraction on my first IP.

I'd worked with the lending team of my current bank but they couldn't get close enough to what was available elsewhere. I'd made them aware I was making enquiries elsewhere etc.

So application submitted with CBA and approved. On being contacted by CBA, my current bank called to offer a 1.1% discount.

Is this a common occurrence ?

I've asked them to confirm the fine details on the offer before I sign the loan docs for CBA...

AL.

 

I don't know if it is common but it has happened to me. My old lender beat my new lenders rate and I stayed with the old lender.

 

Thanks for that Perthguy

 

When people ask to refinance for a better rate, my first question is have they asked their existing lender for a discount. Not much point spending a lot of time, effort and money simply for the existing lenders retention people to make a counter offer.

 

Is your current bank giving you the same valuation ie extracting the same amount of equity?

 

Mine would not give a discount until I submitted the loan discharge authority. That moved my loan to the retentions team who had more latitude to do a better rate.

 

This is why I have clients sign an agreement acknowledging they will be charged a fee for unconditional approvals I secure for them, which they don't use. I also always ask them to go back to their current lender first, because I don't particularly enjoy investing time and expertise into a non income producing endeavour. If I do invest that time and get the client a result, why should I do all that work for no income? Trades get call out fees just to have a conversation with you, and brokers make nothing until months after they do they work... Nope. Not copping that. Have to say though, have never had to request a fee be paid, because Ive never had a client withdraw from a deal after it was unconditional. But I still put the necessary protections for my business, in place.

 

I have heard a few brokers doing that now, and if the clients are that much about rate and not relationship and wont sign the agreement, they probably aren't the kind of client you want anyway!

 

and that seems totally fair to me.

 

this I will check, thanks for the tip.

 

I don't think I've ever written a refinance loan where the only objective of the client is better rate. Rarely when I get that enquiry I explain that discounts change over time, and they should either request a further discount from their existing lender or I re assure them their current rate is approximately what everyone is paying for that type of loan.

 

That's actually really important - the val could come back really low and/or their policy may not support your equity release. Best to check before you stay.

 

The last broker we used took it a step further. If se refinance within 12 (or possibly 18) months we pay her a lump sum commission, I think it was around the 800 mark.

Fair enough deal, she put in a lot of time and effort to get our loans through.

 

I don't disagree with anything here, but for me it's really not a huge problem. As @tobe indicated, it's rarely just about 'rate'.

Also submitting a discharge request up front means that if the banks retention is going to get involved, they make their offer early. If you still proceed with a refinance then the issue is already done with. As a bonus you're already ahead of the game with the discharge process.

The other thing is lenders are often not being that competitive with existing customers anyway. This is less of a problem than it used to be.

 

I agree - by the time we put a discharge in the client is usually pretty keen to leave as rate is not the main concern.

 

Almost all the discharges I have had, the losing institution, once retentions get told no, plays games with lost forms, lost legal docs, lost this, didnt receive that, all to delay discharge.

I once had a lender tell my broker "your client is lazy he hasnt returned the docs still" when he chased it up. I had the express post tracking number showing it as delivered days prior, and when provided with the screenshot, they suddenly found it! Its a christmas miracle!

 

Haha!

I love Christmas miracles, especially the ones where you get a bonus Lindt Santa in the box.

 

Note the 1.1% discount will be off their standard variable rate not your current rate (unless your rate is currently the SVR, which is crazy), which at this time isn't that crash hot if your primary goal is a cheap rate. As others have noted here - in the end refinances are rarely purely based on rate saving.

 

Thanks everyone for your input, very much appreciated.

When I received clarification, there were a number of 'we will request this' and 'subject to' lines.

 

Corey's right. A 1.1% discount with most lenders on an IP, ends up with an effective rate of about 4.5% - 4.6%. Not very exciting, although it is where a lot of the market is sitting right now.