With rates at a historic low, this may be the time to get in while you still can.
21 July 2021|4 minute read
To ease economic suffering for potential home buyers during the COVID-19 pandemic, buyers can now enjoy a welcome combination of record low rates in a competitive lending market - with the official cash rate refusing to budge from its unchanged record low level at 0.10% in November 2020.
In today’s red-hot contested market, we’ve seen some lenders in Australia offering fixed rates as low as 1.67 percent – for just one year.
The Australian Bureau of Statistics figures show the cost of refinancing hit a historic high in May with $14.88 billion worth of home loans refinanced in that month alone.
The last time home loan interest rates were this low was in January 1959. Australia's historically-low interest rates may likely spike in 2022 according to some experts. This may be why now is the right time to refinance your home loan.
David Hyman CEO of Aussie (Lendi Group) says current deals for home buyers and mortgage refinancers are as low as they're likely to see.
“Anyone with a mortgage or thinking about applying for a home loan, now is a good time to make a move and get the most out of locking in a deal before rates inevitably start to incrementally rise.”
“When we look back at lenders fixed rates, just prior to the global financial crisis of 2007 to 2010, the rates were around 7.85 percent.
Then, prior to COVID hitting our shores, fixed rates were around the 3-4 percent mark. No one is thinking that interest rates are heading back to those levels immediately, at least in the next couple of years, but we can expect them to rise at some stage”, he said.
Today’s home owners have the potential to make savings of their home loan interest costs by switching to a new home loan in a process known as refinancing.
“It would be a mistake to think that interest rates will continue to stay at record lows forever. Now could be the last chance for borrowers to capitalise on this season of record low fixed interest rates, so the opportunity is ripe”, Hyman added.
A quick home loan comparison shows that interest rates vary widely between lenders. Some lenders reserve their most attractive rates for new customers, shaving even a fraction off the rate currently paid – this may lower home loan repayments.
Overall, this is how refinancing could save you money and help you avoid interest charges, and potentially own your home sooner.
The process of switching to a new loan may sound like a hassle but it can actually be surprisingly easy, especially with your Aussie Broker on side to help you find your new loan and then handle the paperwork on your behalf.
It’s worth pointing out that when it comes to choosing ‘the best home loan’ there is no one-size-fits-all solution. It’s a matter of finding the right loan for your particular needs.
That’s why your Aussie Broker takes the time to understand your goals and circumstances as your mortgage and home loan interest rate may change.
When your new loan is approved your old bank will be contacted and informed that you plan to pay down the balance and asked to provide the payout figures that apply on settlement day.
From here, your new lender pays out your old loan and you begin making repayments on your new home loan. It’s that straightforward.
If you plan to refinance but have less than 20% equity in your home (in other words you are borrowing 80% or more of your home’s market value) you will be asked to pay lenders mortgage insurance (LMI). This applies even if you already paid LMI when you first bought your place.
Your Aussie Broker can do the sums to work out if refinancing will still leave you better off even if LMI applies.
Some lenders may let you add LMI to the loan balance allowing you to pay it off gradually as part of your regular repayments rather than as an upfront cost.
Talk to an expert rather than wondering if switching to a new home loan is the right step for you, skip the what-ifs by talking to your local Aussie Mortgage Broker about refinancing today.