Refinancing - what's happening about rates

Refinancing - what's happening about rates

The amount you end up paying over the full term of your home loan will depend on the interest rates attached to it. These can be fixed or variable, or in some cases both.

As a borrower, your goal should be to secure the lowest interest rate possible, in order to minimise the cost of your mortgage.

There are many strategies for minimising interest rate repayments, including refinancing. But let’s start with the basics.

What are interest rates?

An interest rate is the proportion of a loan, charged as interest. It is usually expressed as a percentage of the principal amount lent to the borrower.

Fixed interest rates remain the same, while variable interest rates change with the fluctuations of the market. Choosing whether to fix, vary or split your interest rate will depend on many different factors.

A good mortgage broker will walk you through which kind of interest rate is likely to save you the most over the long term.

What is refinancing?

Put simply, refinancing is the process of securing a new mortgage to replace the previous one. Borrowers do this when they want to take advantage of lower interest rates and more attractive mortgage terms.

Why should I refinance?

Refinancing to a cheaper home loan with better terms will save you money. Even a small reduction can mean significant savings over the full course of a loan, which is why it is worth reviewing your home loan regularly.

Do I need to refinance?

If interest rates have decreased or you believe you could be taking advantage of a more competitive home loan, then refinancing could be the right move.

On the first Tuesday of every month (except for January) the Reserve Bank of Australia (RBA) announces the cash rate or interest rate for the month ahead.

Lenders do not have to pass this rate on to their borrowers. However, a mortgage broker can find out which lenders are passing on interest rate cuts, if they are available.

This is why it pays to have a ‘home loan health check’ every 6 to 12 months. You can then make an informed decision about whether refinancing will save you more.

Just ask one of our mortgage brokers to review your existing loan, and they will provide let you know if more competitive options are available. They will then handle the necessary paperwork and organise the move from one loan to the next.

Interest rates are at record lows right now, which makes it a good time to consider refinancing. Contact our brokers to get started.

To find out more about what’s happening with rates, click here.

Financial advice disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner or specialist.