Homeowners should refinance after lenders sliced fixed rates to a fraction above 2 per cent. The banks made cuts in response to the Reserve Bank’s decision to drop the official cash rate to a record low of 0.25%. With the RBA ruling out the possibility of zero or negative interest rates, analysts believe home loan costs are close to “rock bottom”. We suggest that homeowners should strike now to capitalise on current market conditions.
There’s a real opportunity because rates are now at record lows, and even if there’s another fall, it’s not going to be significant. Homeowners with a mortgage for 10 years or more are conditioned to average rates of 3.8%, so if you can lock in year-round repayments that are 1% lower, you’re saving $250 a month.
What’s on offer?
The lowest rates charged by the country’s largest lenders are noticeably higher than options presented by many smaller lenders. With fierce competition in the home loan market could drive rates fractionally lower. That’s welcome news for those shopping around.
Lenders big and small are hungry for new business, and as a result, there are now really competitive rates across the board – not just from the smaller lenders. The sad reality is that new customers are typically offered lower rates than existing customers!
So if you are on a variable rate and have got a good track record of paying down your debt and have built-up equity, then you are in the driver’s seat to turn yourself into a new customer and grab a better deal.
Variable rates start around 2.55% and fixed rates from 1.84%. There are some massive savings to be had!
What should I know before negotiating a new deal?
With ABS figures revealing more than 780,000 jobs were lost in the first three weeks of the lockdown. Many lenders have tightened their lending criteria so you are going to need to be careful of where you go. Those with stable job security need to weigh up the benefits of fixed rates with the flexibility offered by variable loans. Some people like the idea of fixing their rate because they like the certainty of knowing exactly how much their monthly mortgage repayments will cost.
But despite the record-low rates we’re seeing, fixed rates are typically less flexible. They typically don’t come with an offset account, there is normally a cap on extra repayments and if you need to break your loan, there can be a costly break fee.
We say fixing your mortgage when you think rates have hit their trough is a bit like “betting against the house”.
And although borrowers may be enticed by small discounts from their current lender, thorough research could lead to a better deal elsewhere. Know what’s available, know what rates you can get and demonstrate very clearly that you have done your homework on the market and are not bluffing when you say you may refinance with another lender is what we do best.
Ring us on 1300 861 143 to discuss your situation and have a professional assessment of your situation.
Seek Expert Advice
All in all, the best possible course of action is to seek to consult with us to get expert advice on the best solution to your situation. Simply call us on 1300 861 143. We are available 7 days a week from 9am to 9pm.
Your Choice Mortgage Brokers Pty Ltd ATF Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643
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