Christmas might be coming early for thousands of borrowers with a home loan.
An October 2020 Finder survey of 968 Australians with a home loan found 1 in 3 (34%) will refinance over the next year.
With 2.9 million mortgage holders in Australia according to ABS census data, that’s nearly 1 million (986,000) Aussies intending to get a better deal.
Rate analysis by Finder shows these homeowners could save an impressive $395 per month on average, or an eye-watering $389 million as a collective.
And that’s before the Reserve Bank of Australia potentially makes another cut to the cash rate in November.
Graham Cooke, insights manager at Finder, said now is the time to switch for more than one reason.
“Borrowers see record low rates and don’t want to be stuck paying more for their mortgage than they need to.
“The pandemic has made people assess where every dollar they earn goes and refinancing a mortgage can lead to a huge leap in savings,” he said.
Cooke said borrowers could conservatively save almost $5,000 a year – more than two times the average full-time weekly salary in Australia.
Almost one in ten (9%) have already locked in a lower rate in the past few months.
The savings were based on switching the average mortgage ($400,100) with an interest rate of 3.99% – with principal and interest repayments totalling $1,908 a month.
The lowest variable rate available on Finder is 2.17%, while the lowest 3-year fixed rate is 2.14%.
If that same debt was refinanced to a 2.17% interest rate – borrowers would be paying $1,513 a month. That’s a saving of $395.
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Lenders are also ramping up offers to entice borrowers to switch sooner rather than later with more than just low rates.
Some lenders are offering as much as $4,000 in cashback for those willing to refinance..
“Many of these deals are great value for borrowers, but you really need to look carefully at the offer details.
“A sharp interest rate and minimal fees can save you more money than a one-off $1,000 cashback in the long run,” Cooke said.
Cooke said 5% plan to refinance in the next 4 weeks, while one in ten (11%) plan to refinance in the next 2-6 months.
The remaining 18% said they’ll make the switch in the next 7-12 months.
|Are you planning to refinance in the next 12 months?|
|Yes, in the next 7-12 months||18%|
|Yes, in the next 2-6 months||11%|
|I have already refinanced in the last few months||9%|
|Yes, in the next month||5%|
|No, I don’t plan on refinancing||56%|
|Source: Finder, October 2020 survey of|
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