REFINANCE YOUR MORTGAGE

The BSP has cut its benchmark rate by another 0.25% yesterday (April 10, 2025)—does that mean your mortgage rate will go down too?

Unfortunately, no. Banks don’t automatically reduce existing mortgage rates when interest rates fall. Here’s why.

Let’s say you took out a home loan in 2021 with a fixed rate of 5.88% for three years. That rate — often called the teaser rate — stays locked in until 2024. After that, your loan shifts to a floating rate, which adjusts based on prevailing market rates. If interest rates rise, your new rate might shoot up to something like 9.8%.

But here’s the catch: while banks are quick to adjust upward, they rarely adjust rates downward when interest rates fall — like what’s happening today. Only new borrowers get to enjoy the lower rates.

So, how can you take advantage of today’s lower rates?

The answer: refinancing — or what’s commonly referred to in the Philippines as a "bank take-out." This means applying for a new loan with a different bank (at a lower interest rate), which then pays off your existing loan. Your collateral gets transferred to the new bank, and you start repaying the new loan — ideally at much better terms.

Is it easy?

Not always. Based on what I’ve heard from former colleagues in the banking industry, your current bank might delay pre-payment processing, stall computations, or simply refuse to cooperate with the new bank. But if you push through, the potential savings are often worth the hassle.

And if your bank continues to drag its feet? File a complaint with the BSP at consumeraffairs@bsp.gov.ph. You might be surprised how fast things move after that.