Been hearing about refinancing? As interest rates go up, so do the hurdles you need to clear. We explore why refinancing might be a good option for you now… and not later down the line.
When was the last time you refinanced your home loan?
If you answered “never”, or you can’t actually remember, there’s a good chance you’re paying a higher interest rate than you could be due to the “loyalty tax”.
Why, you ask? Because the banks don’t think you’re paying attention, and in that, they only offer their lowest rates to new customers in a bid to win them over – as proven by the RBA.
In fact, a recent RateCity analysis found that customers who stay loyal to their bank could be hit with an extra $5,101 in interest over the next three years alone (based on a $500,000 loan taken out with CBA in 2019).
For a $750,000 loan that would be an extra $7,652 in interest, and for a $1 million loan it’s $10,202 extra.
This is a big reason why owner-occupier refinancing across the country rose 9.7% in June to a new record high of $12.7 billion, according to the Australian Bureau of Statistics.
Related articles:
- The Pros & Cons of Refinancing Your Home
- Everyone in Australia is Refinancing Right Now—Here’s Why
- Understanding When Refinancing is a Good Idea
Great. But why is refinancing now so important?
Ok, so when you refinance, your new lender must assess something called your “home loan serviceability”.
Basically, that’s your ability to meet your home loan repayments at an interest rate that’s at least 3% above the rate you’re being offered.
And as you might have seen on the news, the big four banks are tipping the RBA’s official cash rate to increase from 1.85% in August to anywhere between 2.60% (Commbank forecast) and 3.35% (ANZ forecast) by November.
That means as interest rates go up, so too will the hurdle you’ll need to clear for home loan serviceability when refinancing.
All in all, that means the sooner you refinance, the lower the hurdle you’ll need to clear to ensure you’re not stuck with your current rate and lender.
How to explore your refinancing options
This is the easy bit! Simply get in touch with Soho Home Loans and we’ll help you get the ball rolling.
And even if you don’t want to refinance with another lender, there’s always the option of asking your current lender to review your rate, indicating that you’re prepared to refinance if they don’t come to the table.
After all, loyalty should be a two-way street!
So if you’d like to find out more about what options are available to you, give us a call or send us an email today – we want to help you through the period ahead as much as we possibly can!
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