Rate rise or refinance? The choice is yours
One of Australia’s biggest lenders Westpac has announced it will increase its variable home loan rates by 0.20% for new and existing customers on 20 November 2015.
The change has been a surprise for many homeowners now wondering if their lender will do the same to adhere to APRA’s capital requirements due in mid 2016.
It’s not unlikely for other lenders to follow the moves of the majors, it’s simply a matter of time. So, will you be up for a rate increase or is now the time to join the rush of refinancers and seek out a better deal?
Analysis by Mozo shows a borrower with a loan of $300,000 switching from the average variable rate of 4.63% to the lowest variable rate of 3.84% could save a refinancer $1,596 over 12 months.
Demand for fixed rate loans is also likely to increase as borrowers look for certainty when it comes to their monthly repayments.
Fixed rates are at variable-rate levels – the lowest on the market right now is just 3.50% for one year from Illawarra Credit Union. An average variable rate mortgage-holder could save $2,256 by switching and fixing to this low rate.
Potential refinancing savings:
|Current loan type||Rate||New loan type||Rate||Annual Saving|
|Average variable rate||4.63%||Best fixed rate (1yr) |
Illawarra Credit Union
|Average Big 4 rate||4.92%||Best variable rate |
|Average variable rate||4.63%||Best variable rate |
|Average variable rate||4.63%||Best fixed rate (3yr) |
|The above rates are based on an 80% LVR loan of $300,000 to owner occupiers over a 25 year term as at 15/10/15. Source: Mozo.com.au|
Mozo’s top refinancing tips
It’s clear there are savings to be had by shopping around on your current home loan rate but remember to follow these rules of thumb when refinancing.
- While it’s tempting to switch to a lower variable rate, research whether the new lender offers consistently low rates
- Weigh up whether your savings by switching will pay for the costs associated with refinancing (e.g discharge fees and any upfront charges) within the first 12 months
- Consider a fixed rate , they’re at all time lows and with rate rises looming, it could be a good time to lock in a consistent low rate