By Catherine Mulholland, Otivo
Your mortgage rate is not a fact about the market. It's a fact about how long it's been since anyone asked. Canstar's August 2026 analysis found that a borrower five years into a loan who had never renegotiated was likely paying close to 7%, at a time when almost fifty lenders were advertising variable rates below 6% to new customers. Same borrower, same house, same repayment history — roughly a full percentage point of difference, applied to a very large number, for a very long time. Here's what that gap is worth in dollars and what it takes to close it.
Quick answer
Australian lenders commonly price existing borrowers above new ones, a gap that widens the longer a loan goes unreviewed. As at August 2026, Canstar estimated the average existing variable owner-occupier rate at 6.26%, against a lowest available variable rate of 5.69%. On a $500,000 loan with 25 years remaining, a one percentage point reduction is worth about $312 a month.
Why does the gap exist at all?
Because acquiring a customer and keeping one are priced differently. Discounts are used to win new business, and those discounts aren't automatically extended to people who are already there. Nothing about it is hidden — the advertised rates for new customers sit on the same website as your loan — but nothing prompts you to compare them either.
The gap compounds through inaction. Each time the market moves, new-customer pricing is adjusted to compete and existing pricing follows more slowly, if at all. Five years of that produces the difference above.
What is a one-point difference actually worth?
Take a loan with $500,000 remaining and 25 years to run, owner-occupier, principal and interest, fees ignored.
At 6.95%, the monthly repayment is about $3,518. At 5.95%, it's about $3,206. That's $312 a month, or $3,741 a year, for a phone call. Held across the remaining term, the gap comes to roughly $93,500 — and that assumes the difference stays at one point rather than widening.
Even a modest result is worth having. A 0.25 percentage point reduction on the same loan saves about $79 a month, or around $950 a year. Some households keep the repayment at the old amount after a reduction, which sends the difference to the principal instead.
The three-number phone call
Retention teams exist because lenders would rather discount than lose a loan to a competitor. Walking into that conversation with three numbers changes what it's worth.
- Your current rate, and how long you've held it. It's on your last statement. Knowing the date of your last reduction matters as much as the rate itself.
- What your lender is currently advertising to new customers for a comparable loan. Same product type, same loan-to-value ratio. This is the single most useful number, because it establishes that the lower price already exists inside the same institution.
- A competitor rate you would genuinely consider. Not the sharpest advertised rate anywhere, but one on a comparable product you'd actually move to.
Then ask directly for a rate review and say that you're comparing. Many people find it helps to ask for the outcome in writing. Otivo's debt advice module holds your current loan details and shows what any reduction does to your repayment, your payoff date and your total interest, so you can see whether a retention offer is worth accepting before you accept it.
What if the answer is no?
Then refinancing becomes the live question, and it's worth pricing rather than assuming. Switching has real costs:
- Discharge fees from the existing lender, and establishment or application fees at the new one.
- Government registration and settlement charges.
- Lenders mortgage insurance, if the loan-to-value ratio has moved above 80% — this can be substantial and is the item most likely to make a switch uneconomic.
- A credit enquiry on your file, and the time involved in the application.
Weigh those against the annual saving. A $3,741 annual difference absorbs a few thousand dollars of switching costs inside the first year. A $950 difference may not. It's also worth checking whether the new loan resets the term — a lower rate over a longer period can cost more overall despite the smaller repayment.
Frequently asked questions
Does asking for a lower rate affect my credit score?
Asking your existing lender for a rate review doesn't involve a credit enquiry, because you aren't applying for credit. Refinancing with a new lender does, and multiple applications in a short period are visible on your file.
How often is it worth reviewing?
Many people look at it annually, and after any significant change in the cash rate. The Reserve Bank's lending rate data shows what new and existing borrowers are paying on average, which is a useful benchmark for whether your own rate has drifted.
Does this work on fixed-rate loans?
Not during the fixed term, and break costs on a fixed loan can be significant. The moment that matters is when the fixed period ends, because loans typically revert to a rate set by the lender rather than to a competitive one. Reviewing in the month before the revert date is when the most is at stake.
What if my lender won't engage at all?
Complaints about a lender's conduct can be taken to the Australian Financial Complaints Authority, which is free for consumers. AFCA deals with conduct and hardship matters rather than pricing decisions, so a refusal to discount isn't itself a complaint — but a lender failing to respond properly may be.
The rate you're paying reflects a decision someone made, and decisions can be revisited. Otivo Pty Ltd holds AFSL and Australian Credit Licence No. 485665.
Sources
- Canstar's August 2026 analysis, RBA holds cash rate at August meeting, August 2026.
- Reserve Bank of Australia, Lenders' Interest Rates, May 2026.
- Reserve Bank of Australia, Monetary Policy Decision, 11 August 2026.
- ASIC MoneySmart mortgage calculator.
- Australian Financial Complaints Authority. afca.org.au
- Otivo modelling, August 2026.
Disclaimer
The information in this communication is current as at August 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.