Almost one million loans have refinanced as RBA refuses to budge on rates

Nearly a million Aussies have refinanced their loans as the Reserve Bank of Australia is tipped to hold interest rates higher for longer.

Nearly a million Aussies have taken higher for longer interest rates into their own hands and refinanced their home loans, as borrowers seek relief from 13 interest rate hikes in a row.

Research from Canstar shows 982,900 mortgages switched lenders between May 2022 and September 2024 inclusive, including some that have potentially refinanced to a better rate more than once.

However, more than five million mortgages, including split loans, are still on existing high rates.

Canstar’s Data Insights Director, Sally Tindall, said while an impressive number of people have moved to give themselves relief, more were still stuck, for one key reason.

“While some borrowers are stuck in mortgage prison due to higher interest rates or a lack of equity, complacency will be catching at least some loyal customers out,” she said.

Canstar research shows a borrower with a $600,000 loan today could potentially save almost $12,000 in the next 2 years by switching to a lender under 6 per cent, even after factoring in estimated switch costs.

The research comes amid more unwelcome news for those paying off their home.

Finder asked 38 experts and economists to weigh in on the future cash rate, with all 38 predicting the cash rate will be held at 4.35 per cent when the Reserve Bank meets on Tuesday.

Almost three-quarters of panellists predicted the first cut will come in February as the Reserve Bank looks for more evidence that the inflation rate has returned to target.

AMP chief economist Shane Oliver said inflation was likely still too high for a November cut.

Reserve Bank Governor Michele Bullock is widely predicted to hold the cash rate on Tuesday. Picture: NewsWire / John Appleyard

“But it is falling and likely to continue to do so, resulting in a start to rate cuts in February next year. A December cut is still possible but we would need to see a further sharp fall in underlying inflation in October monthly data along with a renewed rise in unemployment,” he said.

The Australian Securities Exchange RBA rate tracker, which is a measure of market expectations of a rate change, has just 5 per cent expectation of a rate cut to 4.10 per cent at the next RBA board meeting.

In welcome news for homeowners, 78 per cent of experts forecast a rate cut in the first three meetings next year, up from 68 per cent last month.

The call comes despite the consumer price index (CPI), how Australia measures inflation, falling to 2.8 per cent during the September quarter, within the Reserve Bank of Australia’s target rate of 2 to 3 per cent.

Independent economist Saul Eslake attributed the CPI fall to government spending, including on energy rebates and increases to commonwealth rent assistant programs.

“The Reserve Bank is currently assuming these cost-of-living measures won’t be repeated which is why they are forecasting the headline inflation rate will go back over 3 sometime next year,” he said.

Moomoo market analyst Jessica Amir highlights that the Reserve Bank’s chosen metric is trimmed mean inflation, which is the average rate of inflation after “trimming” away the items with the largest price changes. This figure remains at 3.4 per cent.

“The devil is in the details. Trimmed mean inflation, the RBA’s preferred inflation gauge, fell exactly in line with expectations,” she said.

Commonwealth Bank is the last of the big four banks to say rate cuts aren’t coming in 2024. It flagged weakness in the latest release of consumer spending data.

“The data was almost certainly a touch too strong on the key underlying measure for the board to entertain the idea of a rate decrease this year,” Commonwealth Bank head of Australian economics Gareth Aird.

“Our base case is now for a first cut in the cash rate in February 2025.”

Despite weak retail sales, the RBA will hold interest rates higher for longer. Picture: NewsWire / John Appleyard

The higher CPI figure follows indifferent retail turnover off the back of stage 3 tax cuts.

Retail turnover in September might’ve only lifted by 0.1 per cent, but it came off the back of a very strong August figure.

Oxford Economics Australia head of macroeconomics Sean Langcake said there were some green shoots in spending.

“Households’ purchasing power has been supported by steady wage growth and slowing inflation. Moreover, tax cuts from 1 July look to have provided a boost to sales growth,” he said.

Westpac said during its full-year results the number of mortgage holders who are struggling is falling, as customers get used to higher interest rates.

The bank issued 47,500 hardship packages during the last investment period, but the vast majority of customers only needed them for three months.

It also said offset balances had grown by 10 per cent to $60bn, saying the bulk of customers are actually getting further ahead.

Originally published as Almost one million loans have refinanced as RBA refuses to budge on rates