1.2 million Australians could save thousands by switching lenders

Around 1.2m Australians could save tens of thousands of dollars simply by switching lenders or refinancing their home loan, according to new data from Aussie.

Australians could potentially save tens of thousands of dollars simply by switching lenders, according to new data from Aussie.

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About 1.2 million Australians could potentially save tens of thousands of dollars simply by switching lenders or refinancing their home loan, new data from Aussie says.

As property prices have steadily improved, loan-to-value ratios, or LVRs – a percentage used by lenders to assess the risk of a loan – have too, which could unlock an estimated $1.2bn in savings for Australian homeowners.

In Queensland, more than 90 per cent of mortgage-holders are eligible for refinancing because of significant capital gains.

According to Canstar’s Sally Tindall, a record number of Australians switched their mortgage to a different lender when rates were on the rise, but since then that “started to come off the boil” despite a recent “resurgence”.

Ms Tindall said the savings for borrowers who switched to a different lender could “be immense”, adding that banks typically reserved their “sharpest rates for new customers, not loyal ones looking to haggle”.

“You actually have to move your mortgage down the street if you want to get one of those ultra-sharp competitive mortgage rates,” she said.

Finder's head of consumer research Graham Cooke.

Finder’s head of consumer research Graham Cooke said the ­average mortgage-holder could save around $1200 a year by switching lenders.

He said it was important for borrowers to regularly check the interest rate of their home loan.

“The interest rate of your home loan is the most important number in your life,” he said.

“It determines what you’re paying on the most expensive thing you’re buying … so getting that down a little bit will make a big difference in the long run.”

Mr Cooke added that as borrowers owned more of their home, they could “use that leverage to get a discount”.

“The further you are down the home loan repayment journey, the more leverage you have, and the more that it’s worth looking at refinancing,” he said.

For example, someone with a $600,000 loan with 25 years remaining could potentially save more than $12,000 over the next two years simply by switching from a 6.61 per cent rate to a more competitive rate of 5.50 per cent, even after factoring in estimated switch fees of $1150.

A borrower with a $1m loan who switches from a rate of 6.61 per cent to 5.50 per cent could pocket an extra $680 a month, which works out to be a saving of $20,973 in the next two years alone, according to calculations by Canstar.

Mr Cooke, from Finder, said it was also important to consider fees and costs before making the switch, and encouraged borrowers to closely look at the features of a loan.

Canstar data insights director Sally Tindall.

“For example, some lenders with the lowest rate won’t offer something like an offset account … (which) can save you a lot in the long run,” he said.

“Some lenders also offer cash incentives for those who switch, which is worth considering.”

Canstar’s Ms Tindall said a competitive rate for owner-­occupiers with a good track record of paying their debt was around 5.5 per cent.

“If you are sitting on a mortgage and paying a rate that starts with a six as an owner-occupier, you are paying too much. It’s time to take stock,” she said.

And despite the RBA’s decision on Tuesday to leave rates on hold, Benjamin Vagg, a broker at Aussie, said borrowers could still pocket significant savings by shopping around. “While it was surprising to most people that we didn’t receive that interest rate cut on Tuesday, many, many people just by doing that quick shop around … will be able to realise a 25-basis-point cut,” he said.