Home loan refinancing has hit a record high, as mortgage holders rush to find better deals following the Reserve Bank’s (RBA) 12 interest rate hikes.
The total value of refinancing hit $21.5 billion in July, according to the latest Australian Bureau of Statistics data, up 21.8 per cent from last year.
Since the RBA started hiking the cash rate in May last year, Canstar found the average variable rate for existing borrowers had risen from 2.98 per cent to 6.98 per cent.
Borrowers are now paying an extra $1,217 a month on a $500,000 loan over 30 years, or $2,435 a month on a $1 million loan.
While the RBA is widely expected to keep the cash rate on hold when it meets tomorrow, many borrowers coming off fixed rates are yet to experience the full force of the interest rate hikes, with masses of borrowers moving onto variable rates each month.
How much can borrowers save?
Canstar analysis found the average borrower could save $484 per month by switching from the average rate of 6.98 per cent to the lowest 5-Star rate of 5.49 per cent, based on a $500,000 loan over 30 years.
The savings are even greater for larger home loan sizes, increasing to $726 per month for a $750,000 loan and $968 per month for a $1 million loan.
Canstar finance expert Steve Mickenbecker encouraged mortgage holders who hadn’t negotiated their interest rate recently to jump on the trend.
“There is likely to be a lower rate for almost every borrower who has not negotiated their interest rate in the last two or three years and, if they are in solid financial shape, they should be joining the rush to the bank for a better deal,” Mickenbecker said.
“Canstar lists 94 fixed and variable loans with a rate below 5.75 per cent - around 1 per cent below the average variable rate - so there is plenty of choice.”