If you're paying off a mortgage, it's a good idea to periodically compare home loans from different lenders across the market. As there can be significant differences between rates advertised and the rate you're paying, refinancing might mean a huge discount on your repayments.

What's less publicised is the fact that you might be able to get a lower rate from your current lender by simply asking. A 2020 ACCC enquiry found some Australian lenders practice 'opaque discretionary discounting' - discounts offered on a case by case basis to individual customers. This is arguably unfair, but since there's yet to be definitive action to prevent it, here's how you might be able to take advantage.

Discount rate home loans: What you need to know

Home loan lenders will generally advertise an interest rate and comparison rate for all products they offer. However, this advertised rate is often not what everyone pays - in many cases lenders offer select customers a lower rate.

It's nice to think this is out of benevolence. However, there's usually a self serving reason lenders do this. For example, a lender might identify a borrower as a potential repeat customer who might return to it for other loans in the future. Lower rates are also a common 'retention offer', where a lender will offer existing borrowers a discount to ensure they don't refinance to a different lender.

The ACCC found lenders outside of the big four banks and non-bank lenders were less likely to practice discretionary pricing.

How much of an interest rate discount could you get?

Since lenders aren't transparent about how these discounts are applied, it's hard to say exactly how much you might be able to shave off your rate. This was one of the main criticisms from the ACCC - borrowers can't effectively and properly compare products from different lenders as the rate they will actually pay isn't clear.

George Samios, broker and founder at Madd Loans, says the drop might be as much as much as 100 basis points.

"They'll drop it from anywhere from 0.2%…0.5% is quite normal, up to 1%," he told Your Mortgage.

How to get a lower home loan rate

If you're looking to pay less on your mortgage, you might be able to negotiate a discount on your current rate with your lender. Calling up and asking to pay less might sound like a waste of time, but borrowers often have more negotiating power than they realise.

Here are a few strategies borrowers might use to negotiate a lower rate with their current lender:

1. Tell your lender you plan to refinance elsewhere

Being prepared and able to refinance to a different lender is one of the most powerful negotiating tools at a borrower's disposal. Like sunglasses vendors in Bali, lenders really don't want you to walk away. You might find a few basis points are miraculously shaved off your rate after you simply threaten to refinance your mortgage and take your business elsewhere. If you end up haggling with the lender's representative, making it clear you're serious about the possibility of refinancing can improve your prospects of getting the lower rate you want.

Mr Samios says it's "highly likely" you'll get a reduced fee if you do this.

"If you ring up your lender and threaten to leave and say you've found a better rate online….it's probably 80% likely they will reduce the rate over the phone to keep your business," he said.

2. Use a mortgage broker

A mortgage broker may be well placed to secure a cut price home loan rate for you. Lenders will generally have business development managers or similar representatives that deal directly with mortgage brokers. This professional relationship may mean your broker knows lower rates than those advertised are available, and they can negotiate on your behalf.

Another advantage of using a broker is (if they are doing their job properly) they will periodically check in on your loan to make sure you are getting the best rate. If not, they might be able to negotiate the rate down for you or find a lower rate elsewhere.

"If your mortgage broker isn't doing that, find a better one," Mr Samios said.

3. Find out what your lender is offering new customers

One way to figure out if you're getting a raw deal on your home loan is to compare your rate with that your lender is advertising or offering to new customers. This might involve a bit of espionage - you could contact the lender under an alias to see what's available, though, it mightn't give an answer without seeing your financials. If you find out that new customers are getting offered significantly lower rates than you're currently paying, you should present this information to your lender and ask them to match it, perhaps under threat of refinancing.

4. Be a model customer

A history of exemplary conduct as a borrower can significantly improve your negotiating position. Lenders typically price risk into home loan rates - that's why higher loan-to-value ratio (LVR) loans generally have higher rates. A borrower with a history of making late repayments will appear a higher risk of default, and a lender will likely be less flexible when offering them a lower rate than it would be for a borrower who's always paid on time.

Special offer & discounted home loan rates in Australia

When you're browsing advertised home loan rates from various lenders you might notice some mortgage products are labelled 'Special Offer' or similar. Hopefully, you aren't immediately sucked in by such emotive language - it can mean lots of things and there'll usually be a catch. However, in many cases, the special offer will indeed be a few basis points (or even percentage points) lower than that lender's standard variable rate.

Here're a couple of common discounted mortgage offerings from Australian lenders:

Package home loans

Some lenders offer lower rates to customers as part of a package. For example, Commonwealth Bank and Westpac are among many to offer special package rates - Westpac's Premier Advantage package and CommBank's Wealth package. These packages demand an annual fee ($395 at both, at the time of writing) and offer customers access to discounted rates on home loans, as well as waived fees and other benefits.

Cashback offers

Australian lenders also commonly offer cashback for eligible refinancers, although the popularity of such offers can vary. While its not a rate reduction, a cashback offer normally means a few thousand dollars credited to your account as an incentive to refinance. This can be put straight back into the loan, reducing the principal amount and, therefore, the amount of interest you pay.

These offers should still be considered alongside other factors like the interest rate. A $3,000 cashback bonus isn't much use if you're paying 2% p.a more each year in interest. It's also worth noting that refinancing can cost a few thousand dollars in some instances, potentially voiding the benefit of any cashback offer. However, a cashback offer can still be a handy boost and worth considering if you're trawling for ways to save on your mortgage.

See also: 10 effective ways to pay off your mortgage faster

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