New research from Aussie Home Loans revealed that only one in five mortgage holders refinanced their home loans in the past 12 months, despite record-low interest rates. However, six out of ten respondents reported believing there was a better mortgage deal out there for them.
The research also outlined how Australian mortgage holders choosing to stick to their existing mortgage were missing out on potential savings on their monthly repayments. Of the six million active home loans in Australia, just 310,000 of them had been refinanced in the past year, amounting to millions of dollars of potential savings being passed up Australia wide.
Lendi Group CEO David Hyman said that the gap between Aussies choosing to refinance and those sticking with their existing mortgage was “staggering”.
“With three-quarters of Australia in lockdown, we understand that refinancing may not be top of mind.”
“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,” he said.
With the Reserve Bank of Australia holding the cash rate at 0.1%, it looks like those looking to refinance haven’t missed the opportunity for a better deal on their mortgage.
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How much could I save by refinancing?
With some home loans offering fixed rates at under 2%, potential savings are quite substantial. Consider a loan of $450,000 – if the loan is refinanced from 3.3% over 30 years to 1.9% over 25, repayments drop from $2189 a month to $1,885. Overall, this adds up to a saving of $3,648 in the first year of the new loan.
Of course, savings are dependent on your existing and new loan term and the interest rates on offer at the time of refinancing, but refinancing could potentially lead to lower repayments and a more flexible loan with better features. Ultimately, even an interest rate of 1% lower can potentially amount to hundreds of dollars of savings. However, it’s vital to add up the cost and fees of refinancing before making the move.
“It’s good to remember reviewing your loan doesn’t always mean refinancing and you may not even need to change lenders to get a better rate,” he said.
The recent surge in refinancing
According to the Australian Bureau of Statistics, it seems more Australians are beginning to understand the savings that could be made from refinancing, as demonstrated by the record refinancing surge in July 2021.
The data revealed that an all-time high of $17.2 billion worth of mortgages were refinanced during July, equalling a 6% month-on-month increase. Owner-occupier mortgage holders made up the bulk of the refinanced loans, amounting to $11.37 billion.
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Words by Nell Matzen
- Aussie home owners may be missing out on thousands of dollars in savings
- Refinancing boom: Record $17.2 billion worth of home loans switched in July
- Is now a good time to refinance?
- Mortgagees may be missing refinance deals