The recent interest rate rises have received a substantial amount of attention in the media and, in Canberra, the focus has shifted to switching.
People angry over the CBA’s move on Melbourne Cup Day to lift their standard variable rate (SVR), and the subsequent lift by all of the other major banks to lift their rates higher than the Reserve Bank, now have people voting with their feet.
Aussie has received a huge jump of enquiries from homeowners looking to refinance and change lenders. But does refinancing always mean you’ll save money? Aussie Newtown franchisee Sean Beavis said it will depend on an individual case by case basis, as many people may already be on a better rate then the banks’ SVR.
“The most important thing is to make sure there is actually a benefit,” he said.
“Make sure that you clearly add up the cost of switching and that the new interest rate is actually going to provide a saving over and above these costs within a short period of time.”
Mr. Beavis said it was worthwhile consulting a broker, who can search hundreds of loans in a short period of time to ascertain whether a homeowner is on the right loan for their circumstances.
“There is little point spending $1,000 to switch loans just to save $400 per year in interest,” he said. “Many borrowers often don’t realise what a given difference in interest rate means in “dollar terms” – sometimes it’s not much.”
“It costs nothing to do that research though and many people may be pleasantly surprised at what they discover.”
Sean’s five tips for switching:
- Shop around (or get a mortgage broker to do the legwork)
- Work out the costs of switching
- Compare interest rates, fees and features
- Ask yourself if the benefits of switching are worth the costs
- Get a broker to do all of the above!