Best home loan rates: Save $488 a month
Borrowers could save $488 per month by switching to a lower home loan rate.
Aussies can get relief for close to half of the Reserve Bank’s (RBA) interest rate increases by refinancing their home loan, according to new research.
The RBA hit households with a 0.25 per cent hike yesterday, bringing the official cash rate to 3.85 per cent. The hike means borrowers with a $500,000 loan over 30 years will now be paying an extra $1,133 in monthly repayments compared to April last year.
Canstar found borrowers could save $488 a month by switching from the average variable home loan rate to the lowest on its database - with a 1.54 per cent difference between the two.
Also read: RBA admits it did a ‘terrible job’ on interest rates
“With rates already up by 3.50 per cent, borrowers can potentially save half of the last 12 months’ increases by refinancing to one of the lowest rates,” Canstar finance expert Steve Mickenbecker said.
“There are 365 variable and fixed-rate loans below 5.5 per cent listed on Canstar. It's too big an opportunity to ignore for those who are still in good enough financial shape to refinance.”
Top home loan rates
The Mutual Bank currently offers the lowest variable rate on Canstar’s database at 4.94 per cent. However, the rate is only available for borrowers with a maximum loan-to-value ratio (LVR) of 60 per cent or less.
The next lowest rate is from Community First Bank at 4.95 per cent, available to borrowers with a maximum LVR of 80 per cent.
Mickenbecker said Aussies needed to be prepared, be confident and be ready to break up with their bank if need be.
“In terms of switching, the whole process is easier than it’s ever been before, so people should not be afraid to do it,” Mickenbecker said.
Mickenbecker said banks would look at factors like your level of equity, your income, your household budget and your credit record.
He recommended borrowers “clean up” their act before going to a new lender, including clearing any small debts or unneeded credit card limits, and checking their credit report for blemishes.
Borrowers may be charged fees from the bank they are leaving, but Mickenbecker said they were usually “modest” and may be a few hundred dollars in documentation fees.
For the new bank, Mickenbecker said it was worth asking them if they would waive any application or loan-establishment fees.
“Most banks come to the party if you are in a strong position and they are usually prepared to waive that fee. It could be a $600 fee so it is substantial,” Mickenbecker said.
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