The RBA may have swiped left on an April rate cut, but plenty of home owners are taking matters into their own hands by refinancing to save on interest with a lower rate.
There’s nothing like a rate cut to put a spring in home owners’ steps.
February’s 0.25% rate cut, for instance, saw consumer sentiment jump to a three-year high.
But with the Reserve Bank of Australia (RBA) keeping rates on hold in April, and no chance of another cash rate cut until 20 May, many home owners are taking a do-it-yourself approach and cutting their home loan rate by switching to a new loan or lender.
A Canstar survey found more than one in two (55%) variable rate borrowers are considering refinancing, while one in seven (14%) have already made the move over the last 12 months.
The potential to pay a rate starting with a ‘5’
When did you last review your home loan?
According to Finder, variable and fixed mortgage rates have dropped to their lowest levels since early 2023, and loans with rates below 6% are “flooding the market”.
More than 30 lenders are offering at least one variable rate under 5.75%, according to Canstar.
Despite this, the average owner-occupier variable rate is still sitting at about 6.44% (Mozo stats).
That suggests to us that there are plenty of borrowers who could be paying more interest than necessary each month.
Fixed rates are also heading south
It’s not just variable rates that are falling.
Mozo reports a whopping 39 lenders cut some or all their fixed options in March.
And you don’t have to lock in for a long period; a number of one-year fixed rates are also competitive at present.
Question is, how much can you really save by refinancing?
The potential to save over $12,000 in just 2 years
Canstar crunched the numbers and found that a complacent borrower who hasn’t refinanced in a while could be on a variable interest rate of about 6.86% at present.
However, let’s say that same borrower refinanced a $600,000 loan down to an interest rate of 5.74% – that could potentially save them more than $12,000 in interest over the next two years.
Even if your current rate is at 6.06%, Canstar says refinancing to 5.74% could still see you save almost $3,000 in interest over the next two years.
Of course, exactly how much you could save by refinancing depends on the rate you’re currently paying.
That makes it worth giving us a call – we can put you in the know with figures tailored to your situation.
Why wait for an official rate cut?
We could all do with lower home loan repayments.
And with no guarantees that the RBA will cut rates further any time soon, it might be worth taking a look to see if you could save by switching.
Remember too, that refinancing isn’t just about trying to pay a lower interest rate.
It can also be an opportunity to tap into new loan features, or access home equity to achieve personal goals such as buying an investment property or renovating your home.
So if you haven’t refinanced in a while, give us a call today and we’ll walk you through your options.
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