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Refinancing could potentially yield significant savings for many homeowners struggling to keep up with their repayments.
GSC Finance Solutions housing expert and mortgage broker Matt Turner (pictured) said the current market conditions, despite being uncertain, provide an opportunity for many borrowers to snap up a better deal with their lender.
“Banks are hungry to retain business at the moment so there is a real push from banks to negotiate on rates to keep you on board — our clients, for instance, has saved an average of $2,000 per annum just by having us negotiate with their lender,” he told Your Mortgage.
“There is a cost to do this, approximately $800, so you will need to evaluate whether the reduced interest rate will be enough to make the refinance worthwhile.”
Mr Turner said borrowers can also benefit from lower repayments when hunting for the best deal.
“We have a client who refinanced their investment property from a low-tier lender and saved 3% per annum — this was a $10,000 per annum saving for them based on a modest loan and shows that taking action on the problem sooner rather than later can really benefit,” he said.
However, Mr Turner said it is best to avoid fixed-rate home loans at the moment given their current conditions versus variable-rate loans.
“Avoiding fixed rates at the moment is another smart move as these are typically much higher than a variable rate currently — however, fixed rates have recently started decreasing which is a leading indicator that variable rates will reduce soon,” he said.
In an earlier Your Mortgage story, Finch Financial Services founder Julian Finch emphasised the importance of homeowners closely monitoring economic developments, especially inflation, when contemplating fixed-rate mortgages.
“While inflation appears to be cooling and moving in the right direction, there is still scope for some market volatility. While everyone is hoping that rates continue to go down, the reality is that the world economy is in the midst of some fundamental shifts,” he said.
Mr Turner said utilising an offset account to reduce interest costs or moving to interest-only repayment terms are also smart strategies that can provide relief to borrowers currently struggling.
“Some lenders have reduced the buffers for some clients that will allow them to increase the affordability to refinance, this is a case-by-case basis but it certainly helps those in mortgage prison to refinance and get a better deal on their home loans,” he said.
While not advisable, Mr Turner said extending a loan term back to 30 years can is also a benefit of refinancing.
“This is not always advisable, but it can dramatically reduce the repayment costs. You need to seek financial advice, however, if you want to extend your loan term.
“For investors, a new interest only term can help, as not paying back the principal will always reduce the rates.”
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 70% | Featured Online ExclusiveUp to $4k cashback |
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5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% |
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6.14% p.a. | 6.16% p.a. | $2,434 | Principal & Interest | Variable | $0 | $250 | 60% |
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5.95% p.a. | 5.95% p.a. | $2,385 | Principal & Interest | Variable | $0 | $0 | 90% | |||||||||||
5.94% p.a. | 5.95% p.a. | $2,383 | Principal & Interest | Variable | $0 | $0 | 90% |
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Photo by alexskopje on Canva.
Collections: Mortgage News Refinance home loans Interest Rates
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