Only lazy people stick with undiscounted standard variable mortgages: John Symond

Mortgage holders could be saving themselves thousands of dollars per year just by demanding a discount off their standard variable mortgage rate, says Aussie Home Loans founder John Symond.

“Standard variable is for people who have had a mortgage for three or four years and are too lazy to do something about it,” he says.

According to Symond, two out of three times a bank will be willing to offer variable borrowers a discounted rate if they ask.

The average standard variable rate of the big four banks currently stands at 6.76%, but Symond says borrowers should be able to get a discounted variable rate of around 5.8%.

According to Property Observer calculations, a $400,000 mortgage taken over 30 years at a rate of 6.76% equates to monthly repayments of around $1,950, while at a rate of 5.8% they fall by almost $200 to $1,760.

The difference in total mortgage repayments in these scenarios over the life of the loan is over $70,000.

Symond says it is essential that borrowers do a mortgage health check through a mortgage broker before they go and see their bank manager.

“A finance broker has hundreds of mortgages from all lenders, big and small,” Symond told David Koch on Channel 7's Sunrise this morning.

“What they [mortgage brokers] can do in 30 minutes you could not do in two months, and you can get a free and impartial view.

“And then if you like your bank, you can go to your bank and say: ‘I am paying three quarter of a percent to much here’.

“Two out of three times they will just drop your interest rate – just like that.”

Symond says there is no real need to fix your mortgage at the moment given the discount rates available on more flexible variable products.

“It is enticing to see three year fixed mortgages at around 5.75% now, the lowest in a long time, but anyone taking a mortgage today will get a variable rate around that figure.

"Borrowers on a variable rate of 5.75% or 5.8% should be holding off fixing.

“If it helps you sleep at night and you have a tight budget, go and fix half your mortgage.”

But he warns that a fixed-rate mortgage is an inflexible option.

“If you want to increase your repayments or add a redraw facility, a fixed-rate mortgage restricts your flexibility.

“With a variable rate you can do what you want,” he says.