Is it time to review your Home Loan Rates? New to Bank vs Back Book rates.
- Josh Tilley
- 4 days ago
- 2 min read
When it comes to borrowing, not all interest rates are created equal. This is where working with a broker like Accord Loans & Finance, our specialist mortgage broking arm, can make a meaningful difference, providing access to competitive loan options from a wide panel of lenders and helping ensure you are not overpaying simply for being loyal.
Many banks offer what are known as new to bank or front book rates, special, lower rates designed to attract new customers. These offers are often far more competitive than the rates existing borrowers pay on their original loans. If you have had your loan for some time, chances are you are paying a higher back book rate without even realising it.
New to Bank Loan Rates
New to bank loan rates, also known as front book rates, are the interest rates offered to new customers who are taking out a loan with the bank for the first time. These rates are often more competitive and lower than back book rates for several reasons:
Attracting New Customers: Banks use attractive rates to entice new customers to choose their products over competitors.
Market Competition: Competitive rates help banks gain market share and increase their customer base.
Promotional Offers: Banks may offer special introductory rates or discounts to new customers as part of promotional campaigns.
Back Book Rates
Back book rates refer to the interest rates applied to existing loans that were taken out by customers in the past. These rates are typically higher than new to bank rates due to several factors:
Historical Pricing: Loans taken out in the past may have been priced higher due to different market conditions at the time.
Customer Inertia: Existing customers are often less likely to switch banks, allowing banks to maintain higher rates on these loans.
Cross-Subsidization: Higher back book rates can help subsidize the lower rates offered to new customers, balancing the bank's overall profitability.
Why Use a Broker?
Using a mortgage broker for refinancing can offer several advantages:
Access to Multiple Lenders: Brokers have access to a wide range of lenders and can help you find the best rates and terms available.
Time and Effort Savings: Brokers handle much of the paperwork and negotiation, saving you time and effort.
Expert Advice: Brokers can provide expert advice tailored to your financial situation, helping you make informed decisions.
Better Deals: Brokers may be able to negotiate better deals and help you save on fees and costs.
Understanding the difference between these rates and the benefits of using a broker can help you make informed decisions about refinancing or negotiating better terms with your bank. If you have any specific questions or would like a complimentary review of your home loan by our award winning broker, please do not hesitate to contact our office on 1300 022 267.
