Homeowners could save $425 a month by making one simple switch, as the Reserve Bank’s latest 0.25 per cent rate hike puts more pressure on household budgets.
Most Aussies have their home loan with one of the Big Four banks. According to APRA data, Commonwealth Bank, Westpac, ANZ and NAB accounted for 75 per cent of home loans in September.
Also read: Aussie homeowners facing ‘uncharted waters’
By making the switch, homeowners could save $425 a month and $153,070 in total over the life of the loan, based on a variable $500,00 loan over 30 years. Packaged home loans combine your mortgage with other banking products, such as credit cards, so by switching to a non-packaged loan you would lose these benefits.
Canstar group executive Steve Mickenbecker said the Big Four banks should be open to negotiating a lower variable rate to retain homeowners with a “tried and tested repayment record”.
Homeowners could save even more by moving away from the Big Four altogether, with a potential saving of $698 per month for switching to the cheapest variable home loan on the market - or a saving of $250,999 in total.
“The retreat of borrowers from the refinance market defies logic when a shift from the average package rate from the majors to the lowest in the market could save them almost 2.31 percentage points,” Mickenbecker said.
“This is effectively protection from another nine 0.25 percentage point Reserve Bank rate increases.”
Fewer Aussies refinancing
The number of Aussies refinancing has fallen from a record high in August. Refinancing to a new lender dropped 8.2 per cent in September from the previous month, with $17.33 billion in loans refinanced.
But Mickenbecker is expecting numbers to pick back up in the coming months, as fixed-rate loans - originally written when rates were at rock bottom - come to an end.
“A move to the average variable rate will see a doubling of many borrowers’ interest rates in one hit, surely enough to get them to sit up and take notice.”