In the current low interest-rate environment, Australians borrowers are urged to look for home-loan offers with mortgage rates around the lower 3% range, an expert said.
Following the Reserve Bank of Australia's back-to-back rate cuts in June and July, lenders started passing on the cuts to their borrowers, with some even cutting their mortgage rates below the 3% mark.
Many borrowers who recently refinanced were found to have paid hundreds of dollars more monthly, according to a study by Lendi.
Some customers, who might not be aware of the recent market developments, might ultimately be paying too much, especially if they become stuck with their old rates, Lendi co-founder David Hyman said.
"When they initially took out the loan, there may be some level of risk when the lender took on the customer. But over four or five years, if they've paid their loan on time, whatever that issue was at the time doesn't matter now, but the lender isn't going to go typically out of their way to move a customer to the new rate that they qualify for," he told News.com.au.
The study cites anecdotes from borrowers who were able to save hundreds of dollars when they refinanced to a cheaper home loan. One was able to pocket $630 monthly after refinancing a $430,000 mortgage with Liberty Finance to Westpac's 3.79% offer. Another borrower saved $345 per month by refinancing a $328,000 loan with RAMS at 5.42% interest rate to Macquarie with a 3.65% rate.
Hyman said borrowers who are aiming for a $300,000 home loan should look for interest rates around 3.3%. Furthermore, he said borrowers should take advantage of promotional offers like cash back — this would help cover any switching costs if ever they decide to refinance.
The competitive lending environment is making it a must for consumers to check their home-loan rates, consumer finance expert Lisa Montgomery told News.com.au.
"It's really likely that you are paying too much. Regardless of whether you are an owner-occupier or investor, have a look at financial comparison websites. When you are calling your lender you are going to be talking to their retention teams, and you need to be armed with information," she said.