Homeowners shopping for better mortgage rates

Homeowners are taking advantage of falling interest rates by shopping around for the best mortgage repayment deals ahead of expected property price rises.

Rohan Willis and Maddison Gilford with baby Peyton. Picture: Lyndon Mechielsen

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Homeowners are taking advantage of falling interest rates by shopping around for the best mortgage repayment deal, which might turbocharge their savings ahead of recent cuts.

Mortgage brokerage Loan Market is expecting refinancing activity to surge after the Reserve Bank cut rates by 0.25 per cent on Tuesday, reminiscent of the 63 per cent spike in inquiries on the back of the February cut.

Loan Market chief executive David McQueen said borrowers are fed up with paying a “loyalty tax” to their banks and are willing now more than ever to shop around.

“History shows us that many lenders don’t always pass on the full cut, and even those that do may not offer their most competitive rate to existing customers,” he said.

If lenders passed on both of this year’s 0.25 per cent cut to borrowers in full, those with the average mortgage will save almost $2600 annually, according to financial comparison site Finder. All the big four banks have committed to giving borrowers the entirety of Tuesday’s cut.

Finder’s head of consumer research, Graham Cooke, said there is currently a 40-point difference between the average and lowest rate available.

“If the average homeowner switched to the lowest rate on offer, they would effectively give themself one cut and get ahead of the Reserve Bank’s next decision,” he said.

Young Gold Coast couple Maddison Gilford and Rohan Willis, both 29, weren’t waiting around for their bank to passively decide their rate. The designer and plumbing pair are in the process of refinancing the mortgage on their Runaway Bay home, which will free up $300 a month ahead of the arrival of their second baby.

“Having a home loan, it’s such a big portion of your income that’s been deducted straight out of your bank account,” Mr Willis said.

“Any savings, or slight percentages you can save on that sort of money, is going to make a massive difference.”

Brisbane-based Loan Market broker Taryn Howe said there is significant competition in the lending market as rates continue to fall from their highest level in a decade.

“Some lenders are competing aggressively for clients, and with serviceability assessments coming down, there are more opportunities for borrowers to make a move and save money on top of the RBA movements,” Ms Howe said.

“There was a bump in refinancing requests after the last rate cut, and that will happen again after this week.”

If the cash rate is cut a further 50 points, as half of economists are predicting if inflation remains in the target range, the average homeowner would be paying $420 less per month and $5044 in interest over the year.