The phone call that could save you thousands

If you are a homeowner with some equity in your home, make yourself a commitment right here and now.

Promise yourself that when you finish reading this column, you will call your bank.

In less than 500 words time, you will be doing something that you could end up thanking yourself for for many years.

This phone call is more important than the chat you were planning to have with a colleague, and way more important than the coffee you were going to make.

Sport schmort — who needs to flip to the sports pages right now? Not you. Not when you are about to do something that could save you tens of thousands of dollars.

Short of calling for a campaign of mass civil disobedience, I urge everyone to stop whatever work they are doing right now and to just make a call.

Your bank is of course hoping you don’t bother calling them after reading this column, or anytime at all really.

It relies on your busyness — or your laziness — to keep charging you more interest than you have to pay.

But Canstar research out this week shows there are rewards to be had if you make the effort.

Banks are currently ramping up their efforts to compete for low-risk borrowers, and about half will give discounts on interest rates to those customers with decent equity in their home.

But they won’t offer it — you have to ask for it. You may even have to threaten them with switching lenders.

The research shows that if you have 30 per cent equity (in other words, your loan is worth 70 per cent of the value of your property) then there is a good chance banks will shave about 0.13 per cent off your interest rate.

If you have 40 per cent, the savings are even better, with about one in two lenders offering a discount worth 0.21 per cent on the interest rate you currently have.

On a loan worth $470,000, that’s an average $56 monthly saving after dropping to 3.48 per cent interest, which is worth close to $20,000 over the life of a 30 year loan.

If you put that $56 straight back into the loan, you can shave one year and four months off that loan, worth about $14,500.

These calculations would depend on interest rates remaining stagnant, which of course they won’t. As interest rates rise, the savings will be greater.

Why are banks allowing this? Because they are worried about the number of new customers on their books with an 80 per cent loan to value ratio, given falling property prices on the east coast are likely to reduce that ratio even further.

Those with a decent amount of equity should not underestimate their power as a consumer in this market.

You should be able to get a commitment on your request for a discount while you hold on the phone. At worst, they will call you back after pretending to do some head scratching over it.

Ready? Start dialling.