Could you save $125,386 by refinancing your home loan?

It’s no secret, Australian home owners have been switching their mortgages in droves.  

The latest figures from the Australian Bureau of Statistics show that $26.9 billion worth of home loans were refinanced in the month of June, made up of $17.4 billion from owner occupiers and $9.5 billion from investors. 

If those numbers seem big, you’re right. The $26.9 billion figure (which is not seasonally adjusted) represents the largest volume of switching recorded in at least two years.   

What’s behind this switching surge? Well, one reason, highlighted by a recent Mozo analysis, is the potential windfall refinancing can provide borrowers who are able to switch to a cheaper home loan with a lower interest rate. 

“Something as simple as comparing interest rates and refinancing when you find a more competitive deal can really pay off,” says Mozo spokesperson, Tom Godfrey. 

“If you’re with a Big Four bank you might be able to push them to sharpen your rate but the biggest savings are found beyond the top end of town.” 

And anyone looking for evidence of the price premium paid by borrowers for their loyalty need to look no further than the latest Lenders' Interest Rates from the Reserve Bank. 

According to the RBA, existing variable rate home loan customers (3.08% average) are currently paying 29 basis points more on average compared to new customers (2.79% average). 

“While it’s encouraging to see a jump in loan refinancing, complacency can be a costly business when it comes to your home loan,” says Godfrey.  

How much could refinancing save you? 

So we know that complacency can cost, but how much can mortgage holders actually save? Depending on your current rate, potentially a lot. 

A Mozo analysis found that a borrower with a home loan of $400,000 would stand to save $125,386 over a 30-year term if they were able to switch from the current average Big Four variable rate (3.53%) to the lowest variable rate in the Mozo database of 1.88% (1.97% comparison rate*) with the Reduce Home Loans Super Saver loan.^^ 

That may be the lowest variable rate presently available, but here’s how the current average Big Four variable rate stacks up against a range of lower rates based on the same scenario as outlined above.

Of course, while the interest rate on offer will be a large consideration for potential refinancers, potential costs such as discharge fees on an existing loan or upfront fees with a new loan may also be important to take into account. 

RELATED: Low rates abound for refinancers with lower LVRs

Want to crunch your own numbers to see how much interest you could potentially save on your mortgage? Get started with our Switch and Save Calculator. 

Otherwise if you’re ready to start comparing offers with a view to refinancing check out some of the hot rates in the table below, or head on over to our refinance home loan hub to compare more deals from an even larger selection of lenders. 

^^This scenario is based on an owner occupier borrower with an 80% loan-to-value ratio (LVR) making principal and interest repayments on their home loan.