This is an illustrative example based on common patterns seen in home lending — not a specific individual’s story.
Key takeaway: Interest rates aren’t one-size-fits-all — lenders price risk using loan-to-value ratio (LVR) tiers, and crossing a threshold by even a small amount can move you into a materially different rate bracket, even against another buyer with an almost identical profile.
Consider two colleagues — we’ll call them Alex and Jordan — who worked together, earned near-identical salaries, and bought similar-value properties within a few months of each other. Comparing notes afterwards, they discovered their interest rates were noticeably different, despite everything else about their situations looking the same on paper.
This is one of the most common sources of confusion I hear about — people assume rates are set purely by income and credit history, and get frustrated comparing notes with a friend or colleague who seemingly got “the better deal” for no obvious reason.
The Problem Wasn’t Income — It Was Which Side of an LVR Line They Landed On
- Alex had an 82% loan-to-value ratio; Jordan’s was 79%. That three-point gap put Alex just over a common lender threshold, while Jordan landed just under it — pushing them into genuinely different pricing tiers.
- Most lenders price risk in bands, commonly around 80%, 90%, and 95% LVR, with each band carrying its own rate and often its own Lenders Mortgage Insurance treatment. A borrower one dollar into the next band up can pay noticeably more than one dollar below it.
- Neither of them realised this at the time of applying — both assumed the rate they were offered was simply “the rate,” rather than a number directly tied to a threshold they could have shifted with a slightly larger deposit.
What Typically Changes the Outcome
- Asking a lender directly which LVR bands apply to a specific loan product before applying, so the effect of the deposit size is understood upfront
- Finding even a modest extra amount to push the deposit just over the next threshold, which can lower the rate by more than the extra deposit amount would suggest
- Comparing the total cost difference (rate plus any LMI) across nearby LVR bands rather than assuming a slightly bigger deposit isn’t worth the effort
The Realistic Result
In scenarios like this, a borrower who tops up their deposit to clear the next LVR threshold can end up paying a lower rate for the life of the loan than one who stops just short of it — often making the extra deposit effort worth many times its size over a full loan term.
The Actual Lesson
Two borrowers who look identical on income and credit history can still receive genuinely different rates, because pricing is tied to risk bands most people never ask about. Before assuming your rate reflects your overall financial strength, it’s worth checking exactly where your deposit sits relative to the nearest LVR threshold — it might be closer than you think.
Written by Michael Wignall, who’s spent 30+ years in banking and home lending across the ACT, Illawarra, and Riverina regions of NSW.
