Refinancing
Is Your Home Loan Rate Still Competitive?
Interest rate decisions by the Reserve Bank of Australia (RBA) over the past few years have shifted the mortgage landscape. Many Australian homeowners are on home loan rates that may no longer reflect what is available in the current market.
Credit is subject to lender criteria, assessment and approval. Fees, charges and eligibility criteria may apply.
Danny SaputraPublished Updated 2 min read
The "Loyalty Tax" Is Real
Lenders often reserve their most competitive rates for new customers, leaving existing borrowers on higher "back-book" rates. This difference, often called the loyalty tax, can add up to a significant amount of extra interest over time.
What Counts as a Competitive Rate?
There is no single competitive rate. Your Loan-to-Value Ratio (LVR), loan size, repayment type and employment all affect the rates available to you. The useful question is whether your rate is in line with what lenders are offering borrowers like you today.
How to Check Your Competitiveness
- Review your last statement: Don't guess. Check exactly what your current variable rate is.
- Compare with the market: Look at what the same lender is offering new customers for the same product.
- Work out the difference: on a $600,000 loan, a 0.5% rate difference is about $3,000 a year in interest, before fees and other loan factors. This is an illustrative example only.
At Finsap, we help you cut through the bank jargon and compare your current loan with options from our panel of 30+ lenders, so you can see whether it is still competitive.
Questions
Common questions
How often should I review my home loan?
We suggest reviewing your home loan at least once a year, or whenever there is a significant change in the RBA cash rate or your personal circumstances.
Does refinancing cost money?
There can be costs involved, such as discharge fees from your old lender and application fees for the new one. Whether the interest saved outweighs these one-off costs depends on your loan, so it is worth checking before you switch.
How much could I save by refinancing?
It depends on your loan amount, rate, fees and loan term. As an illustration, on a $600,000 loan, a 0.5% rate difference is about $3,000 a year in interest, before fees and other loan factors. Any repayment or savings estimate is illustrative only and based on the information you provide. Actual outcomes depend on your loan amount, rate, fees, loan term, repayment type, lender criteria and approval. Refinancing may not be suitable for everyone.
Related
Keep reading
Refinancing
What Is LVR and Why Does It Matter for Your Refinance?
Your Loan-to-Value Ratio affects the rates and options available to you. What LVR means, how to calculate yours, and what lenders look for.
· 1 min read
Market Update
RBA Rate Cuts: What It Actually Means for Your Mortgage
When the Reserve Bank moves rates, your lender does not always pass it on in full. What the gap between the cash rate and your rate means for you.
· 1 min read
Refinancing
Can You Refinance Without Payslips or Financial Statements?
Many homeowners assume refinancing means mountains of paperwork. For eligible borrowers with equity and a clean repayment history, there may be a simpler path.
· 1 min read
General information only, not personal advice.
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