It is the best of times to be a borrower, and not only because interest rates are at historic lows, with the big four banks offering the biggest discounts on home loan rates since the global financial crisis.

Borrowers are being offered discounts of up to 1.25 per cent off standard variable mortgage rates, says Mortgage Choice, with other reports suggesting discounts of 1.4 per cent had been observed as banks try to grow their share of the $1.3 trillion residential home loan market.

A 1.25 per cent discount on a $300,000 mortgage would save the borrower $3750 a year.

People looking for a new loan can use this discounting to get finance well below the advertised rate. Some people could be signing up for loans with an advertised rate of 5 per cent on a variable home loan, while a savvier borrower is paying as little as 3.75 per cent. Even a small discount can save a borrower tens of thousands of dollars over the life of the loan.

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Phil Naylor, CEO of the Mortgage and Finance Association of Australia, told The New Daily that almost no one should take the advertised variable rate seriously.

“These discounts exist purely so the banks can steal customers from each other,” said Mr Naylor, who has seen discounts approaching 1.5 per cent on “very big loans”.

The heavy discounting is also good news for people with existing loans, who find themselves in a strong position to renegotiate their existing arrangements.

“Discounting is always something that has gone on. We’re just seeing that it’s a little bit higher,” said Mortgage Choice spokesperson Jessica Darnbrough.

Owen McDonald, a broker at Mortgage Choice, Australia’s largest independent mortgage broker, says the banks “have a real appetite” for mortgages at the moment.

“As such, they are willing to offer sharply priced rates, significant discounts and other incentives, including cash back offers,” he says.

“So, if you have the ability to buy, now is a good time to jump onto the property ladder and take advantage of the low rate environment and lender competition.”

What does this mean for fixed vs variable?

Executive director of mortgage broker firm smartline Joe Sirianni told The New Daily that the quantity of the discount on offer for variable rates should not be your only consideration.

“The decision to fix is still the right decision if you take a perspective that rates will go up in the next six to 12 months,” Mr Sirianni said.

“There’s always the option of doing a shandy. You lock in some as fixed, and keep some variable. That’s popular as well.”

For long-term certainty, fixed rates are an attractive option, especially given that interest rates will eventually rise.

“I’ve not seen rates this low for a long, long time. In my 30 years of banking, they’re probably the lowest I’ve ever seen. In my mind, this is as good as it gets. The next rate move is probably upwards.”

But Mr Sirianni said you should be wary of locking yourself in for too long.

“I’m not a huge advocate for long term fixed rates. I wouldn’t go past three years,” he said. “You’d be surprised how people’s circumstances change in five years.”

How you can get a discount

1. Shop around

Olivia Maragna, co-founder of Aspire Retire Financial Services and 2012 Australian Adviser of the Year, recommends playing off the banks against each other.

“Make a call to your bank and tell them that you are shopping around for a better deal. Ask them if they can offer you a better interest rate. In most cases they would prefer to keep you as a client than see if you take your loan to another bank,” Ms Maragna said.

2. Ask

The banks are very unlikely to offer you a discount unless you speak up. So, “ask and you – generally – shall receive,” Ms Maragna said.

3. Don’t appear to be a risk

The less risky you appear to the banks, the better your discount, according to Mortgage Choice’s Jessica Darnbrough.

“A whole myriad of factors play a part – what the profession of the person is, the size of the loan they’re taking out, their credit history and also, importantly, the size of their deposit.”

4. Talk to a mortgage broker

Phil Naylor said his best piece of advice is to see an MFAA-accredited advisor.

“They’re experienced in negotiating these things all the time and they’ll be able to, not only get a better rate, but be able to advise you on all the rates that are around the place.”

5. Borrow lots of money

This isn’t a serious piece of advice, but loans upward of $500,000 are more likely to get a bigger discount.

“I wouldn’t like anyone to think that you can just walk into the bank and get 100 basis points. It would depend on the size of the loan,” Mr Naylor said.

If you are in the market for a big loan, be sure to ask for a better rate, as your chances of success are high.