Australians rush to refinance their mortgages to save and tuck away the extra cash
Aussies have been warned to get out of “old lazy loans” that are costing them a fortune. Here’s how you can get a better deal on your home loan.
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Savvy borrowers who can save by refinancing their mortgages say they would use the extra money to reduce their loan or they would tuck the money away rather than spend it.
Banks are continuing to drop mortgage rates – the cheapest three-year fixed sits at 1.99 per cent and variable rates are as low as 2.17 per cent.
New independent research compiled for mortgage giant Aussie recently quizzed 1000 borrowers and found 80 per cent of Australians expected to retain – not spend – any savings made by refinancing.
Carmen James, 49, and her husband Keith, 51 from the Ipswich suburb of Brookwater recently refinanced their loan with their existing bank Westpac.
They only did it after their mortgage broker contacted them out of the blue encouraging them to review their deal.
“My broker could see I was on a higher rate and if he didn’t prompt us I probably wouldn’t have even looked at it,” Ms James said.
“There’s no grand plans of what to do with the extra money. We would normally travel but I’m not sure when we can do that again – I may put it onto paying down the loan.”
Ms James was paying a variable rate of 3.96 per cent and has now opted for a split loan.
She fixed 90 per cent of loan for three years at 2.19 per cent and the remaining amount is variable at 2.77 per cent.
On a $300,000 30-year loan reducing the rate from four per cent to 2.5 per cent would reduce a borrower’s monthly repayments by $247 to $1432. The customer would save $84,400 over the life of the loan.
Aussie chief executive James Symond said customers shouldn’t be stuck on “old lazy loans” that cost them dearly.
“Banks themselves are happy as Larry that the process is painful and the customers think it’s painful because then the customers don’t look at moving,” he said.
“If you can’t go through the process yourself pull aside a mortgage broker and they go through the process on a customer’s behalf.”
Data from Aussie shows refinancing customers were up 10 per cent in the June quarter compared with the same period last year.
The Mortgage and Finance Association of Australia’s chief executive officer, Mike Felton, said there remained a “mismatch between new and old customers”.
“We have fixed and variable rates at historical lows and we have seen a massive amount of refinancing activity come through the broker channel,” he said.
“Ensure you employment is stable and your expenditure is modest within your means. There’s a lot more attention on this than pre-COVID.”
The Reserve Bank of Australia board meets tomorrow and it’s expected the cash rate will stay on hold at 0.25 per cent.