Homeowners in record-high numbers are taking advantage of reduced interest rates and competitive refinancing offers. Are you ready to take the leap?
When times are tough, the belt gets tightened.
And we’ve seen that play out across the country in a big way recently, with the number of Australian families who refinanced their mortgage in May the highest on record, according to the latest figures from the Australian Bureau of Statistics (ABS).
In fact, 33,712 Australians refinanced a whopping $15 billion worth of mortgages in May.
To put that into context, before COVID-19 struck, that monthly figure floated around the $10 billion to $11 billion mark.
Anecdotally speaking, the recent 50% increase in refinancing sounds about right to us.
We’ve been flat chat over the past few months helping families refinance their home loans and save thousands of dollars in annual interest repayments.
Why are so many people refinancing?
First and foremost, the economic squeeze brought on by COVID-19 has made people stop and take stock of where they can make savings in their family budget.
And one possible way to do that is by refinancing, as Australian home loan rates have never been lower.
That’s because, on top of the Reserve Bank of Australia (RBA) dropping the cash rate to a record low, lenders are currently competing hard for your business by offering never seen before interest rates.
ABS Chief Economist Bruce Hockman further explains: “The value of existing owner-occupier loans refinanced with a different bank [in May] was by far the highest on record as borrowers responded to reduced interest rates and refinancing offers.”
So how much can you save by refinancing?
Well, that’ll depend on your individual circumstances and several other factors, including how big and old your loan is.
But to give you a lower-end-of-the-scale example, a recent RBA study found that for loans written four years ago, borrowers are charged an average of 40 basis points higher interest than new loans.
“For a loan balance of $250,000, this difference implies an extra $1,000 of interest payments per year,” explains the RBA.
And if your loan amount is higher than the above example – or if your loan is older – then there’s a decent chance that refinancing could save you even more than $1000 in interest payments each year.