Financial comparison website RateCity.com.au is urging borrowers to take advantage of the home loan market after finding a greater potential to save more money now while interest rates have fallen.
According to RateCity, the range between the lowest and highest standard variable home loan rates has widened by 0.43 percentage points since the top of the interest rate cycle in early 2011. The difference between the top and bottom standard variable rates in RateCity’s database is currently 2.01 percentage points, from 4.99 percent to 7 percent.
Standard Variable home loan interest rate ranges
Lowest variable rate
Highest variable rate
Range between lowest and highest (percentage points)
Source: RateCity.com.au, excludes basic and intro variable rates.
Michelle Hutchison, Spokesperson for RateCity, said many borrowers are missing out on big savings because of complacency and naivety.
“It’s easy to feel complacent when home loan rates have been falling and lenders have passed on most of the savings to variable borrowers, but this is in fact the best time to refinance your home loan.
“The average standard variable rate has fallen by about 1.35 percentage points since November 2011 and is now 5.96 percent. That means variable borrowers with a $300,000 home loan are saving on average about $268 per month compared to November 2011 (based on the average standard variable rate).
“But there is a big difference between interest rates on offer and the difference has increased, which can mean thousands of dollars in savings if borrowers compare home loans and negotiate or switch.
“For instance, the difference in repayments for a $300,000 home loan between the current lowest and highest variable rates in RateCity’s database is about $387 per month or more than $139,000 over 30 years. That’s also an extra $63 per month or more than $22,000 more over 30 years compared to the range of rates from two years ago.
Despite this, there are fewer borrowers refinancing. In fact, Australian Bureau of Statistics Housing Finance data, released last week (March 13, 2013), shows the number of home loans refinanced in January was 12,583, the lowest level since April 2011 (original figures).
Although the proportion of borrowers refinancing their home loan out of all loans financed in January (32.4 percent) was slightly above the previous month (32.3 percent), it was 2 percentage points lower than January 2012 (34.4 percent), according to RateCity.
Comparing each state, NSW borrowers were the biggest switchers, with 37.5 percent of all loans written were refinanced. Tasmanians were the least likely to be comparing home loans and switching, with under 24 percent of loans were refinanced in January.
Proportion of home loans refinanced in January 2013
Source: RateCity.com.au, ABS
Mrs Hutchison said it’s borrowers who are missing out on what lenders are offering by sitting still and ignoring the home loan market.
“Don’t let complacency or lack of knowing the home loan market get in your way of bigger savings. Use RateCity to find out how your home loan compares, take advantage of what’s on offer by renegotiating with your existing lender or switch to a better deal.”
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