Why Banks Suddenly Find a Better Rate Only When You Try to Leave

There’s some poor behaviour in banking that you should know about. Oh, you know about a lot of it...but this one you mightn't.

A client asks their bank for a better rate. The bank says no - or offers something unremarkable. So, the client calls a broker.

Borrowers are often told their current rate is the best available, until they try to refinance.

A good broker doesn't begin by trying to move you for fun. I always start with the client's existing bank, unless the client is desperately unhappy with said bank.

This is part of acting properly and in line with best interest duty. If your current lender can offer a competitive rate, the right structure, and a sensible overall outcome without the minor disruption of a refinance, then staying put could well be the best result for you.

I'll lodge a request via their pricing tool, citing better rates at other banks. Here is a good client, here is their position. Can you do better? Too often, Computer Says No. I don't stop there, however. I then escalate the request to a pricing team, advising them that you are considering refinancing. If we get another "sorry" - I keep doing my job.

I compare the market more deeply, find a better option, assess policy and structure (which takes time - more so with self-employed or complex clients), calculate the numbers, get an approval with a more accommodating bank and prepare the refinance.

Then the discharge form is lodged.

And suddenly, with an extraordinary flurry, the bank discovers it can not only improve the rate, but sometimes throw in a cash bonus to stay as well. Of course banks are entitled to retain their clients...but it’s the point at which they decide to become competitive: after the client has flagged they may leave, after the broker has already tried to resolve it with that same bank, and after significant work has been done to create an alternative.

Why this matters to borrowers

This isn’t just frustrating for brokers. It matters for you as a client. If your bank was willing to offer the sharper deal only after you tried to leave, the big question is:

Why weren’t you offered that earlier?

Especially when your broker started with them. That's the part to which borrowers should pay attention - and my clients, after seeing the work I put in, invariably do.

The process had begun with an attempt to keep the client exactly where they are, provided the outcome is genuinely competitive and in their interests. So when the bank refuses to move early, but somehow finds its loyalty once a discharge form is lodged, it raises a fair question about how seriously that client was being treated all along.

What that delay can cost

A simple demonstration:

You have a $1 million home loan over 30 years.

At 5.80%, your monthly repayment is about $5,867.53.

At 5.60%, your monthly repayment is about $5,740.79.

That is a difference of roughly $126.74 per month, or about $1,520.89 over 12 months.

If your bank kept you at 5.80% while a better 5.60% rate was available, you may have paid around $1,500 more over the course of a year than necessary. Every year. Add that up over the years...it's a lot.

If your existing bank later offers that sharper rate only after a discharge is lodged, it is entirely reasonable to wonder for how long they were prepared to let that extra cost continue.

Why this feels like bad faith

By this point, the broker has often already:

• reviewed the client’s current lending, structure, understood their needs, personal situation and their business

• approached the existing lender first

• tried to negotiate a better outcome with that lender

• escalated this to a senior pricing team with same lender

• researched the market

• assessed serviceability, policy and structure

• and built the successful refinance that finally got the bank’s attention

The broker has done the work that created the pressure. Then the bank calls the client at the eleventh hour and sweet-talks them with loving whispers - a lower rate and a cash gift.

That is why this leaves such a bad taste. It's like a bad ex-boyfriend.

Of course clients are tempted. We understand this. But the improved offer appears only after the broker has exposed that the original offer wasn't that competitive to begin with.

The real point

This is not an argument that a client should never stay with their existing lender. Sometimes staying is absolutely the right call.

But you should ask the reasonable question:

If my broker approached my bank first, and my bank still said no, why did a decent offer only eventuate once I was leaving?

This is bad faith. On a large loan, bad faith can be expensive.

Final thoughts

A broker doing their job properly will begin by seeking to keep the client with their current bank - if that can be done on competitive terms and in the client’s best interests.

So when that bank refuses to help at the start, but becomes cooperative only at the end, borrowers should notice. The timing speaks volumes about how your bank values you when it thinks you will stay quietly put and keep paying.

Do you feel your bank could be treating you better? Give me a call today and I'll let you know.

Not financial advice.