How will your budget be affected by the big bank rate rise?
In case you’ve missed it, the big banks haven’t exactly been generous with their home loan rates lately. NAB and Westpac have already raised rates by as much as 0.28%, and experts are tipping that similar hikes from the remaining major banks won’t be far away.
At the moment, the average big bank standard variable rate for owner occupiers sits at 5.28% - which is a whopping 86 basis points higher than the overall average in the market, and 131 basis points higher than the lowest rate in Mozo’s database at 3.39%, offered by Reduce Home Loans. And that difference could be costing you a bundle in extra interest.
Mozo crunched the numbers on the recent rate rises from NAB and Westpac to see just how much it’s going to hurt your bottom line, based on a $300,000 home loan paid back over 30 years.
If it looks like you’ll need to tighten your belt a little, never fear! To avoid the big bank rate hike and save money on your mortgage, we’ve got one word for you: refinancing.
By refinancing your mortgage to one of the great low rate home loan offers in Mozo’s database, homeowners stand to save a bundle. Here are some of the top refinancing options at the moment to get you started:
- Reduce Home Loans Rate Buster Variable* - 3.39% (3.46% comparison rate)
- Homestar Variable Home Loan - 3.49% (3.54% comparison rate)
- FreedomLend Variable Home Loan - 3.53% (3.53% comparison rate)
- loans.com.au Essentials Variable - 3.59% (3.61% comparison rate)
These low rate loans could save you serious bucks. For instance, say you currently have a $300,000 owner occupier home loan with NAB and your rate is going to increase to 5.32%. By switching to Reduce Home Loans' low rate of 3.39%, you stand to save a massive $122,710 over a 30 year period.
To work out how much you could save by refinancing your mortgage to a better rate - and find the right offer to do it - head over to our switch and save home loan calculator.
Tips to save money when refinancing
- Look out for switching fees. Before you refinance your home loan, work out if that lower interest rate will actually cancel out any costs involved with making the switch - including discharge fees from your old mortgage, as well as upfront fees for the new loan, like application fees. In most cases, the benefits of switching will far outweigh the cost - but it’s best to check!
- Be aware of LMI charges. Although switching is usually better value than staying put, there’s one big exception - if you have an LVR of 80% or more, you may need to pay for Lender’s Mortgage Insurance again. That can be another major cost that could mean refinancing is not as good an option as it seems, so make sure you know what the premium would cost and weigh it against the lower interest rate. If you’ve paid off more than 20% of the property’s value, then you’re in the clear.
- Consider fixing your rate. Interest rates are tipped to be on the rise late this year or next year, so now might be the perfect time to lock in a fixed rate offer. Head over to our comparison table to find some of the best fixed rate mortgage offers.
- Search for high value - not low rates. A low interest rate is definitely a good thing - but it’s not the only thing you should be looking for when comparing home loans. Keep an eye on other features as well, like offset accounts, free extra repayments, or flexible repayment options that might help you manage your money better, or pay off your loan quicker.
Ready to refinance and say goodbye to high rates from the big banks? Head over to our home loan search tool to find the best option for you.
*Product no longer exists (as of 18/12/2018)