Mortgage-holders who switch from the average variable rate to Westpac’s new 1.99 per cent rate stand to save as much as $49,329 over the life of the loan, as banks continue to battle it out for homeowners’ dollars.
Westpac announced its new 1.99 per cent two-year introductory rate on Tuesday, becoming the first major bank to offer a variable rate below 2 per cent. The rate reverts to 2.59 per cent after two years.
However, customers who switch from the average variable interest rate of 3.16 per cent to Westpac’s offer could save $49,329 over the life of the loan, based on a $400,000 loan.
“The home loan market is running hot as a Big Four bank enters the territory that was once typically reserved for online lenders – a variable rate below 2 per cent,” Mozo spokesperson Tom Godfrey said.
Also read: 5 biggest mistakes refinancers make
"The message for borrowers couldn’t be clearer; if you haven’t compared interest rates in the past 18 months, the chances are your monthly mortgage payments could be unnecessarily high.”
And, he added, if you’ve been paying off your mortgage for a while and have built up equity, you may be able to score an even lower interest rate.
WATCH: How to pay off your mortgage years early.
The new Westpac rate is only available to customers with a loan-to-value ratio of at least 70 per cent.
However, it’s not the lowest such rate on the market. In fact, there are at least five similar loans available with Reduce Home Loans offering a 1.88 per cent interest rate.
Reduce Home Loans- Rate Cutter
Homestar - Star Essentials
Police Credit Union - Better Home Loan
Tic:Toc - Variable Home Loan
FreedomLend - Variable Home Loan
It comes amid new research from Lendi finding that while 62 per cent of borrowers understand the importance of refinancing on a regular basis, only 20 per cent have refinanced in the last year.
“There are approximately 6 million outstanding mortgages in Australia, and less than 450,000 of those have been refinanced in the last financial year, despite unprecedented low interest rates,” Lendi CEO David Hyman said.
“The gap here is staggering. With three quarters of Australia in lockdown, we understand that refinancing may not be top of mind right now,” he said.
“But by not setting aside a small amount of time to look at their home loan, Australian mortgage holders could be missing out on thousands in savings, which could be really helpful for many families especially in the current pandemic