Rate rise or refinance? The choice is yours
Australian's have enjoyed some seriously low home loan rates for a long time, but the winds may finally be changing with recent indications from RBA Governor Philip Lowe hinting that a rate rise may finally be on the way.
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 current* average variable rate in the Mozo database of 4.35% to the lowest variable rate of 3.39% could save a refinancer $1,896 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, with a number of competitive fixed rate deals currently on offer.
Potential refinancing savings:
|Current loan type||Rate||New loan type||Rate||Annual Saving|
|Average variable rate||4.35%||Best variable rate Reduce||3.39%||$1,894|
|Average Big 4 variable rate||4.62%||Best variable rate Reduce ||3.39%||$2,445|
|Average variable rate||4.35%||Best fixed rate (3yr)Easy Street|
|Average Big 4 variable rate||4.62%||Best fixed rate (3yr)Easy Street||3.69%||1,095|
|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