The jury’s still out on whether or not the Reserve Bank will be cutting interest rates tomorrow, but mortgage savings could come sooner for those planning to refinance to a better home loan deal.
A new rate analysis by Finder.com.au has found that the average homeowner could save an impressive $395 a month, simply by switching to the cheapest rate on offer.
With so many savings to be made it’s perhaps unsurprising that Finder’s October 2020 survey found that 1 in 3 homeowners were looking to refinance within the next 12 months.
Finder’s insights manager, Graham Cooke, believes that COVID-19 is a big reason people are choosing to make the home loan switch.
“Borrowers see record low rates and don’t want to be stuck paying more for their mortgage than they need to.
“The pandemic has made people assess where every dollar they earn goes and refinancing a mortgage can lead to a huge leap in savings,” he said.
Cooke also said that borrowers could conservatively save almost $5,000 a year – which is more than two times the average full-time weekly salary in Australia.
The savings were calculated based on a homeowner switching from an average mortgage ($400,100) with an interest rate of 3.99 per cent and principal and interest repayments totalling $1,908 a month.
Finder found that the lowest variable rate on their website is 2.17 per cent, while the lowest 3-year fixed rate is 2.14 per cent.
Based on this, if that same debt was refinanced to a 2.17 per cent interest rate then borrowers would be paying $1,513 a month, resulting in the $395 a month saving.
Savings would be even higher for those servicing larger debts.
If you’re thinking about refinancing your home loan then a good first step is to talk to your current lender to see what they can offer you.
It’s also a good idea to do your research so you know what rates other lenders are offering, and to be prepared to make the switch if you find a more competitive deal.