Homeowners continue to switch mortgages in near-record numbers as variable rates fall

By Tom Watson · · 3 min read
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The lure of low home loan interest rates appears to be continuing to drive Australian property owners to refinance their mortgages in considerable volumes.

According to the latest external refinancing figures released by the Australian Bureau of Statistics (ABS) last Thursday, $16.05 billion worth of home loans were refinanced from one bank to another during October.

While the latest refinancing figure is down on the August peak of $17.78 billion, it’s 33.6% higher than a year ago and still one of the highest levels ever recorded by the ABS.

External refinancing (seasonally adjusted). Source: ABS lending indicators , October 2021

abs-external-refinancing-lending-indicators-october-2021

According to Mozo Banking Expert, Peter Marshall, while there are likely a number of factors motivating mortgage holders to refinance, the abundance of competitive home loan rates is likely a significant factor.

“It’s no coincidence that we’ve seen high levels of refinancing in this low interest rate environment. For many, especially those who may have been stuck on a product with a higher rate, this period has presented a golden opportunity to make the most of the savings that can be gained by switching to a lower rate.”

Home loan rates: The lay of the land

Broadly speaking, home loan rates are close to the lowest they’ve been in years, which is no surprise given that the official cash rate has sat at a record low 0.10% for over a year.

Drilling down, the picture is a little more complicated though, because fixed rates and variable rates are currently moving in different directions.

On the one hand, mortgage lenders have been cutting variable rates with a real verve lately, meaning there’s an abundance of sharp rates available to borrowers. As a result of these recent cuts, the average variable rates for both owner occupiers and investors in the Mozo database are currently the lowest they’ve been since tracking began in 2015.

 

Fixed home loan rates are a different kettle of fish though. Since bottoming out in March, longer-term fixed rates (4 and 5-year terms) have been steadily ticking up, and we’re just starting to see shorter-term fixed rates (1, 2 and 3-year terms) follow suit.

However, as our fixed rate averages graph shows, rates for borrowers looking to lock in are still very low compared to previous years.

How much could refinancing save you? 

That’s a brief snapshot of where rates are sitting at the moment, but why is that important for refinancers?

As Marshall noted, one of the most likely reasons behind the recent uptick in refinancing is existing mortgage holders seizing the opportunity to switch from a higher rate to a lower rate and, in the process, lowering their repayments.

To illustrate the amount refinancers could potentially save by switching to a lower rate, here’s a look at the monthly repayment difference on a selection of rates and loan sizes. These numbers are based on a borrower making principal and interest repayments over a period of 20 years, but you can crunch your own using our mortgage repayment calculator.

$250,000$500,000$750,000
2.25%$1,300$2,601$3,901
2.75%$1,353$2,706$4,059
3.25%$1,407$2,813$4,220
3.75%$1,462$2,924$4,385

Those are just example rates, but there are even lower ones available. For instance, the lowest variable rate in the Mozo database for owner occupiers with an LVR below 80% ($400k loan size, P&I repayments) is currently 1.77% p.a. (1.86% p.a. comparison rate*) with the Super Saver Variable loan from online lender Reduce Home Loans.

Of course, low interest rates are unlikely to be around forever.

As we said above, fixed home loan rates are already on the rise, and the Reserve Bank has made clear it’s intention to start lifting the official cash rate again in the next few years - a move which would almost certainly have a flow on effect to variable home loan rates.

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

Interested to see how much you could stand to save by moving lenders? Get started straight away with our handy switch and save calculator, or head on over to the Mozo refinance home loans comparison table to compare a range of offers for yourself.

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 14 September 2024 Important disclosures and comparison rate warning*

Refinance home loan comparisons on Mozo

Promoted

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Fixed Express Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.99 % p.a.
    Fixed 2 years
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Lock in a low 2 year fixed rate with the Mozo award winning Home Lender of the Year. Available for live-in borrowers with just a 10% deposit required. Free extra repayments (up to 20% in fixed period), free redraw and partial offset available. $10 monthly service fee. Aussie support centre. Fast approvals. Up to 6 free offset accounts (T&Cs apply).

  • 3 Year Special Fixed Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    This home loan is available for purchase or refinance, complete with 1, 2 or 3 year fixed rate options. Minimum 10% deposit required.

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Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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