Refinancing your home loan

IN these times of rising living costs and higher interest rates, a bit of extra cash could come in very handy.

Putting money back in your hip pocket doesn’t have to mean working a second job or living on baked beans.

If you have a home loan, one simple step could free up an extra $400 each month.

The secret to saving can lie with refinancing Home loan refinancing – the process of switching from an old home loan to a new one - has been at record levels for a number of months.

The Australian Bureau of Statistics (ABS) says $19.1 billion worth of mortgages were refinanced in December 2022 alone.

“Borrowers continued to switch lenders for lower interest rates as the Reserve Bank’s cash rate target rose,” ABS head of Finance and Wealth Sean Crick said.

Research by Mortgage Choice has put a clear dollar value on the potential savings of refinancing.

A study of more than 1,000 Australian home loan customers found that, on average, borrowers who refinanced with a broker saved $409 on their monthly repayments, compared to $249 for borrowers who went direct to their lender.

Savings on this scale go a long way to explaining why refinancing activity has been so high. And plenty more homeowners may be set to switch their loan in 2023.

Mortgage Choice found one in three home loan borrowers are considering refinancing their mortgage this year, a figure that rises to almost half (44 per cent) of borrowers aged 35-44.

Mind the (interest rate) gap

How can the savings from refinancing be so generous? Easy.

While most lenders have been passing on the Reserve Bank’s interest rate increases in full to existing customers, many have been cutting their introductory rates for new customers to remain competitive.

This has led to a significant gap between the rate loyal customers pay, and the interest rate available to new customers.

The Reserve Bank, for example, says that in late 2022 the average variable rate being paid by existing customers was 0.50 per cent higher than the average paid by new customers.

“Unfortunately, many lenders don’t reward their customers for loyalty,” Mortgage Choice CEO Anthony Waldron said.

Why pay more?

Mortgage Choice found one in two borrowers are either aware they’re paying extra to stay loyal to their lender, or they just don’t know if they’re paying the best rate available.

“Unless Australian lenders begin offering the same rates to new and existing customers, it will pay to regularly review your home loan,” Mr Waldron, said. But with so many home loans to choose from, it can be challenging to know if a new loan is suited to your needs, and if it will put you in front financially.

That’s where your Mortgage Choice broker comes in.

We

Make Refinancing Easy

Your Mortgage Choice broker can help you compare a wide range of products and lenders, and offer expert guidance on the best options for your situation. We’ll crunch the numbers to show how much you can save by refinancing and handle all the paperwork, including winding up your old loan.

That way, you’ll know with certainty that you’re getting the best loan for your needs. Long story short: we make refinancing easy. Talk to us to find out how much you may be able to save on your loan repayments - you have nothing to lose except an over-priced home loan.

Copyright 2022 Mortgage Choice Pty Limited (ABN 57 009 161 979, Australian Credit Licence 382869) and Smartline Operations Pty Limited (ABN 86 086 467 727 Australian Credit Licence 385325) are owned by REA Group Limited. Your broker will advise whether they are a credit representative of Mortgage Choice or Smartline.