There’s so much information online about the latest home loan offers, interest rates or special deals available. This is great for borrowers because it means we all have access to information, which helps us make better financial decisions.
BUT… the information available online doesn’t always tell us the whole story….
What is ‘discretionary pricing’ in relation to home loan interest rates?
Discretionary pricing is when a lender offers a discounted interest rate to an individual borrower. The discount offered by a particular lender is generally based on a host of loan-specific criteria. However, it can also depend on the volume of applications the particular lender has received, performance against sales targets and quarterly profit figures.
“Advertised rate discounts,” are generally published and relatively easy for borrowers to discover. However, discretionary pricing concessions aren’t advertised anywhere and are much harder to ascertain because they’re offered on a case-by-case basis to individual borrowers.
Whilst the size of these discounts can be based on the Loan to Value Ratio (LVR) of the proposed loan, the loan size and the proposed loan amount for the borrower, it’s not always clear which criteria the lender has applied, to determine the pricing concession.
If borrowers are getting discounts, why is this a problem?
The ACCC has argued previously that the lack of transparency around discretionary pricing practices makes it hard and time-consuming for borrowers to accurately compare lending offers from multiple lenders.
We tend to agree.
However, we’d also add that it’s always been hard (and time-consuming) for borrowers to accurately compare lending offers from multiple lenders, because there’s much more to consider than the interest rate alone. When you add in the potential for discretionary pricing discounts, it makes the practice of comparing advertised rates even less reliable as a way to determine which lender may be the most suitable.
We meet borrowers all the time who’ve tried to review their loans themselves in the past. However, they quickly became frustrated and didn’t really know what they should be comparing, so ended up just staying with their current lender (which is exactly what lenders are hoping will happen!)
We also meet borrowers who admit they didn’t conduct much research into their options the first time around. Because at the time, they were more concerned about actually securing the home they loved. They simply accepted the first loan that was offered by their existing bank.
Is discretionary pricing costing you money?
If you negotiated your existing loan yourself – yes.
How can *you* take advantage of discretionary pricing so you too can save interest?
That’s easy!
It’s our job to compare your lending options from a host of lenders, so you don’t waste time running around trying to find the right offer from the right lender (based on information that doesn’t tell you the whole story). Each and every day we have discretionary pricing requests approved for our clients and we’d love the opportunity to do the same for you.
Call our team on 02 6286 6501 to get started.
From there, we can investigate what options you have to secure a better rate on your loan.
