Home loan increased this month? See if you could save by refinancing

The December Reserve Bank of Australia (RBA) rate hold last week was the ointment to last month’s 25 basis-point sting in the wallets of homeowners around the country. 

But it doesn’t change the fact that variable home loan rates have skyrocketed since the RBA began hiking the cash rate. 

While it’s tempting to just accept each rate rise your lender sends and move on with life, choosing to compare home loans and refinance instead could help save you a pretty penny. 

The average rate is costly, but there are cheaper options available

At the time of writing, the Mozo database tracks 297 variable rate home loans. The average variable rate in the database is 6.85% p.a. (P&I, OO, $400k, <80% LVR), as of 13 December 2023. 

Currently, the lowest rate we track is The Capricornian’s Country to Coast Variable Rate Offset Home Loan, offering rates from 5.69% p.a. (5.70% p.a. comparison rate*). 

Comparing the average rate to the lowest rate in the Mozo database shows you could save as much as $287 per month if you were to switch from paying 6.85% p.a. to 5.69% p.a. 

The potential savings don’t only apply to your monthly repayments either. The difference that’s often overlooked comes from the total interest you end up paying along the way.

For this one, we’ll need to break out the mortgage repayment calculator.

If your interest rate is 6.85% p.a., you’re up for monthly repayments of $2,789, with the total amount of interest you have to pay being a whopping $436,687. This takes your home loan bill, when you add the $400,000 loan and the interest together, to $836,687 after 25 years.

Now, if you take the same loan over the same amount of time, but you’ve got a lower interest rate of 5.69% p.a., your interest payable comes down by $86,104 to $350,583 – or, $750,583 in total. 

A difference of $86,104 at the end of your 25-year home loan, or about $3,444 per year, is hardly loose change.

If you’re currently with a Big 4 bank for your home loan, the average variable rate in the Mozo database is 7.48% p.a., as of 12 December 2023 (P&I, OO, $400k, 80% LVR). So, you can imagine the savings you might make if you refinance to a low-rate home loan.

Which lenders offer low variable home loan rates in December?

There are plenty of lenders in the Mozo database that currently offer variable rate home loans below the average rate of 6.85% p.a. 

Some of the lowest rates we track come from customer-owned banks and credit unions, like The Capricornian and Police Bank, but there are also several digital lenders offering interest rates far below the average:

Mozo compares 297 variable rate home loans, 191 of which are below the average rate of 6.85% p.a. (as of 13 December 2023). 

If you’re looking to break into the market for the first time using a competitive rate, or if your existing home loan rate is rising, compare home loans to find a cheaper rate that could save you serious cash. 

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