Risk-Based Pricing: Why Two Borrowers Get Different Rates
ADS Team
Author
August 22, 2026
about 17 hours ago
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In short: Risk-based pricing means your rate reflects your specific risk and value to the lender rather than a single posted rate. The main levers are LVR, loan size, owner-occupier versus investment, repayment type and your credit profile - and several of them you can change before applying.
Key takeaways
- LVR tiers are the single biggest driver - crossing 80% or 70% moves pricing.
- Larger loans often attract better pricing because fixed costs are spread.
- Investment and interest-only lending price above owner-occupier P&I.
- The advertised rate is a starting point, not the rate you must accept.
The pricing levers
| Factor | Typical effect |
|---|---|
| LVR below 60% | Sharpest tier |
| LVR 60-80% | Standard |
| LVR above 80% | Higher, plus LMI |
| Investment vs owner-occupier | +0.20 to +0.50 |
| Interest-only vs P&I | +0.20 to +0.40 |
| Loan size above ~$750k | Often a discount tier |
What you can actually change
- Get below an LVR tier. A small extra deposit or a revaluation after repayments can move you a whole band.
- Switch interest-only to P&I if you no longer need the cash flow.
- Consolidate splits so the loan size reaches a better tier.
- Clean up conduct - three to six months of clean statements before applying.
Negotiating with the framework
Lenders hold discretion below the advertised rate, and retention teams have more of it than new-business channels. The effective approach is specific: name a competitor rate, state your LVR band, and ask them to match.
Requesting a discharge form is the strongest signal available, and it costs nothing to ask.
Frequently asked questions
Why do new customers get better rates?
Acquisition is priced to win business; existing books are priced to retain margin. It is a commercial choice, and the ACCC has examined it. Asking for a reprice is the direct remedy.
Does my credit score set my home loan rate?
Less directly than in some markets. LVR, product and loan size dominate. Your score matters more for approval than for the rate itself.
Is a package discount worth the annual fee?
Do the arithmetic. A $395 fee against a 0.20 point discount on $500,000 is worth it - the discount is $1,000 a year. On $150,000 it is not.
Related reading
- PD, LGD and EAD: The Three Numbers That Price Your Loan
- Why Banks Do Not Always Pass On the Full Rate Move
- Refinancing Your Home Loan: The Complete 2026 Process
Sources
- Home Loan Price Inquiry final report — ACCC
- Housing lending rates, statistical table F6 — Reserve Bank of Australia
Rates checked as at 2 August 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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