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Home loans: switch and save

Find the best mortgage. Here's how to save thousands on your home loan.
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01 .Introduction

Toy house

CHOICE asked three borrowers to shop around for a better deal on their mortgage, and found that they can make savings on their home loan of up to $46,000 during the life of their loan. Find out how you could do it too.

In brief

  • The best savings were achieved by switching to a credit union or an online subsidiary of a major bank – and you can’t get any of those loans through mortgage brokers.
  • A good interest rate isn’t everything – you need to check that the costs of switching won’t outweigh the savings you’d make.

After the dramatic 1% rate cut by the Reserve Bank of Australia (RBA) in October, following a 0.25% cut the previous month, home owners have finally begun to see relief from a period of escalating interest rates.

It’s a different picture from the high-stress landscape in which we sent out our home loan shoppers in August: the RBA had increased rates 12 times since December 2001, from a cash rate low of 4.25% to a high of 7.25% (as this report was published in October 2008, rates were at 6%).

While falling interest rates have taken the immediate pressure off home owners, the competitive home loan market still leaves plenty of opportunity for customers to secure a better deal. Our scenarios highlight the huge savings possible through refinancing – or sometimes just using your research to negotiate a more competitive rate with your existing lender.

Please note: this information was current as of October 2008 but is still a useful guide to today's market.

CHOICE survey

Meet our borrowers:

  • Cate from inner Sydney. When Cate contacted CHOICE her interest rate had just gone up to 9.67% – a large increase compared with the 6.82% she paid when she took out her loan in April 2001.
  • Luke, Eugenie and son Cian from suburban Canberra. Luke and Eugenie face a problem, if they refinance before the fourth anniversary of their loan they’ll have to pay an early repayment fee of 0.45% of their original loan amount: $1620, plus a $300 discharge fee.
  • Adam and Debra from Sydney. Adam and Debra were in for a shock – after three years on 6.47% their interest rate would change to 9.11%, sending their minimum repayment up by about $775 per month.


We found cheaper options that can save our borrowers between $18,000 and $46,000 over the life of their loan. The best savings would be achieved by switching to a credit union or an online subsidiary of a major bank – and neither of these options is available through a mortgage broker.