Australians urged to review their home loans with ‘significant savings’ potentially up for grabs

When was the last time you checked in on your home loan?

That’s the question ME is encouraging Australian home owners to ask themselves given that some home loan customers may be missing out on ‘significant savings’ by failing to take advantage of a loan with a lower interest rate or fees.

“A home loan is likely to be your most significant financial commitment, so it’s worth taking the time to review it occasionally,” says ME’s general manager, John Powell.

But how can homeowners identify whether their loan is actually competitive or not? Powell acknowledges that that can be tricky, but there are a few key elements that are worth comparing from one loan to the next.

“One lender may have a lower rate, but higher fees or different features. Therefore, you must consider interest rates, terms, loan costs and other factors that apply to your situation. This gives you the power to make an informed decision about what loan is right for your circumstances.”

“It’s also worthwhile referring to the advertised ‘comparison rate’ which lenders are required by law to disclose loan costs to the borrower. This will allow you to compare apples with apples.”

Homeowners refinance record numbers

For plenty of borrowers, the steep decline in home loan interest rates over the past few years has put the competitiveness of their loans into the spotlight. As a result, many have chosen to refinance to a more competitive deal.

“Refinancing simply means switching your home loan from your current lender to a new one, and it’s a process that can let you reap the benefits of a lower rate, lower fees or improved loan features – all of which can provide significant savings over time,” says Powell.

“Don’t feel you need to stay with your current bank either. Exit fees on new loans have been banned, making it easier and less costly to refinance.”

And according to the Australian Bureau of Statistics, a fair number of borrowers have recently switched their loan from one lender to another. In fact, 2021 was the biggest year on record for refinancing, with $181 billion worth of loans refinanced during the year.

But if you haven’t refinanced your loan recently, how much could you potentially save? That all depends on your current interest rate and the fees you’re paying, but as Powell notes, the savings can be significant - especially over the life of the loan.

To illustrate the possible savings on offer, here’s a look at the difference between the monthly repayments and total interest on a variety of interest rates for a borrower with a  $500,000 loan size being paid off over a 20-year period (with principal and interest repayments).

Of course, interest rates are likely to change over any 20-year period, but the point remains the same: even a small difference in interest rate can equate to a large difference in cost.

RELATED: Multiple lenders are offering $3,000 cashback to refinance your home loan

Curious to see how much you could save on your own home loan by refinancing? Let our handy switch and save calculator crunch the numbers for you, or start comparing a range of different offers using Mozo’s dedicated refinance home loan comparison table.