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Interest rate relief: How mortgage holders can save $150 per month

The RBA isn’t expected to cut interest rates until late next year, but there are still ways mortgage holders can get rate relief.

Aussies are being urged to give themselves an interest rate cut for Christmas, as the number of homeowners refinancing plummets.

The Reserve Bank (RBA) isn’t expected to start cutting interest rates until late next year at the earliest, but that doesn't mean mortgage holders have to tough it out until then.

According to the latest RBA data, existing mortgage holders are paying an average interest rate of 6.18 per cent. But there are rates as low as 5.69 per cent on offer.

Property in Brisbane, Queensland. Mortgage and interest rates concept.
Mortgage holders can give themselves two interest rate cuts for the holidays. (Source: Getty)

Are you a homeowner hit with higher mortgage repayments? Contact tamika.seeto@yahooinc.com

Canstar calculated that the average existing borrower who refinanced a $500,000 loan repaid over 30 years to the lowest ongoing variable rate of 5.69 per cent could slash their repayments from $3,056 to $2,899.

That works out to a saving of $157 per month or as much as $1,884 per year - and a rate cut of 0.49 per cent or nearly two regular interest rate cuts.

Bigger savings are available if borrowers are able to switch to the lower-rate loan and maintain their repayments at the higher amount. If a borrower continued paying that $3,056 amount each month, they could potentially save $134,171 in interest and repay their loan three-and-a-half years sooner.

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Canstar finance expert Steve Mickenbecker said the home loan savings were “too big a prize to ignore”.

“Canstar’s analysis of new owner-occupier variable interest rates shows that rates offered by lenders spread all the way from 5.5 per cent to 9.5 per cent,” Mickenbecker said.

“It means that there are borrowers who will be paying 3.5 per cent more than the savvy ones who have found their way into the leading deals and are effectively being subsidised by the high rate payers.”

Mickenbecker said borrowers shouldn’t be “gifting extra margin to the bank every month” and there was little reason why borrowers should be paying a rate above 7.5 per cent.

Refinancing plummets

The number of Aussies refinancing their home loans dropped in October, the latest ABS data found.

The value of refinanced mortgages plummeted to $17.35 billion, the lowest level since the start of the rate hikes in May 2022 and down $1.31 billion from the previous month.

RateCity research director Sally Tindall noted the decline came off the back of the largest refinancing event Australia had ever seen.

“In the space of 18 months, over $344 billion in mortgages have refinanced across more than 670,000 loans,” Tindall said.

“While some borrowers can’t refinance because they’re in mortgage prison, there’s likely to be plenty more out there that could benefit from switching lenders.”

At the end of September, a record high of 1.57 million mortgage holders were ‘at risk’ of mortgage stress. According to the Roy Morgan data, this equates to nearly a third of all borrowers and was up 7,000 on the previous month.

The number of borrowers considered “extremely at risk” reached $1.04 million - or 20 per cent of borrowers - which was significantly higher than the long-term average of 15.3 per cent.

There will be 880,000 fixed-rate home loans coming to an end over the course of 2023, RBA data shows, and another 450,000 in 2024.

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