In the Sunday issue of the NZ Herald the front page was all about how you should be asking your bank for a floating rate of 5.4% – or else you’ll leave. Then on the TV One news last night the suggestion was you rock up and demand a floating rate of 5.2%.

While I totally agree with the sentiment (and that sentiment is that banks are operating on reasonably fat margins right now so are in a position to pass on some of that to you) I disagree with the idea you go and threaten them with your departure in the hopes of getting a discounted rate.

That’s a bit childish I think. While you might get some discount (just to shut you up) a more considered approach will probably yield a better result wihtout completely buggering your relationship at the bank.

When banks are assessing your interest rate they don’t just think about the margin they’ll earn, there’s more to it than that. Basically it comes down to risk and the upshot here is that the better the financial risk you are, the better the rate you’ll get.

In other words if you want to get a better rate from the bank try talking to them in terms of the risk you (don’t) pose to them. Argue the case as to why you’re a decent bet, maybe even a better bet than some of its other customers. It’s tempting to think the bank ‘owes you’ because you’re shelling out a lot in mortgage repayments but don’t lose sight of the fact that they’ve probably got a few hundred grand on the line themselves.

So think about things like:

Is your loan under 80% of your property value? The lower the better.

What about income – is it from a stable and reliable source? Do you have a strong surplus after paying your living costs, mortgage etc?

What about your track record of mortgage payments and payments on other loans?

These are all questions that help demonstrate your riskiness or lack thereof. It’s an approach that we use and we know it tends to yield better results than rocking up and threatening to leave.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

Join me on Google Plus