Australia’s economic chief is encouraging home mortgage holders to ask their bank for a better home loan deal or find a new bank.
In a recent speech, Reserve Bank of Australia governor Philip Lowe said he’s very pleased to see that more people are switching banks to get lower mortgage interest rates.
“I encourage people who haven’t already taken up the opportunity to do that to look at their mortgage rate and look for a better deal,” he said in a speech in July.
You can check how good your home loan is by using loanScore, a refinancing calculator that can tell you how much you could be saving by switching to a different lender.
In fact, a record number of people are switching banks to refinance their mortgages with a new lender.
“One positive out of the pandemic, I think, is people have been sitting at home and looking for better deals on their mortgages,” Lowe said. “We’ve seen huge amounts of refinancing in the past couple of months. The value of refinance loans was almost as high as the number of loans for newly-purchased properties.
“That’s the first time in our history.”
In May, a record 21,000 Australian homeowners refinanced $10 billion worth of home loans by moving to different lenders, according to data from the Australian Bureau of Statistics. That’s about double the number from the year before.
June was almost as big, with 20,000 homeowners refinancing $9.3 billion worth of home loans.
There are some big savings to be made from refinancing.
For instance, you might be paying an interest rate of 3.19% on your current loan and by switching lenders you could drop that to 2.19%.
UNO mortgage advisor, Kym Moore calculates that with such an interest rate reduction for a $500,000 mortgage with 25 years to run, monthly repayments would drop from $2,421 to $2,166 – a saving of $255.
Additionally, banks are competing strongly to refinance mortgages, so many are waiving or discounting the fees that usually come with a new loan.
If it looks like you can get a better deal, the next step is to speak to your mortgage broker, who can help you find a great rate with a new lender.
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Philip Lowe said the extra cash people are saving is helping them support the housing market, but ultimately the strength of the housing market will come down to the unemployment rate that results from the COVID-19 pandemic.
“My main concern for young people isn’t that they won’t be able to get into the housing market. It’s that they won’t have a job,” he said.
“If they get jobs and they get training, then I think the housing situation will inevitably look after itself one way or another.”
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