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Record low interest rates are pushing Australians to refinance like never before

Posted: 15 July 2020 2:38 pm
News

Woman on her laptop.
Switching to a lower rate could save you over $5,000 a year.

Australian home loan rates have never been lower. And these falling rates are driving existing home loan customers to look at their home loans and find a better deal elsewhere.

In the latest home loan data from the Australian Bureau of Statistics (ABS), the number of refinancers rose 30% month on month. That's May 2020 versus April 2020 (the latest data we have).

In dollar terms, the value of refinanced loans rose from $12,021,800,000 in April to $15,192,700,000 in May. That's an increase of 26.4%.

This data tells us that plenty of borrowers are looking for better home loan deals and they are finding them.

The Reserve Bank of Australia has dropped the official cash rate five times since June 2019. This has made borrowing costs for lenders cheaper, driving down variable rate home loans.

In April 2019, the lowest variable rate loan in Finder's database was 3.48%. Today, the lowest rate is 2.19%.

And yet, at the same time, lenders have dropped their fixed rates even further. The lowest owner-occupier 3-year fixed rate has plummeted from 3.74% in April 2019 to 1.99% today.

This means you can get a much cheaper home loan rate now. But if you already have a home loan, you might not be getting the best deal. While many lenders have passed on recent rate cuts, it's quite uneven. Some lenders consistently pass on a 0.25% cut each time. Others pass on less or only offer their best rates to new customers (a sneaky but common practice).

And that's why borrowers are rushing out to refinance.

In many cases, borrowers don't even have to look very far for a better deal. A third of May's home loan switches were internal: borrowers switching loans but staying with the same lender.

It never hurts to check your lender's website to see what rates they're currently offering. Your own lender might have a suitable product with a better rate than your current one.

Here's how much you can save by switching. Let's use April 2019's lowest rate versus today's to see how much you can save.

Interest rate of 3.74%

  • Loan amount: $500,000
  • Loan term: 30 years
  • Monthly repayment: $2,312

Interest rate of 1.99%

  • Loan amount: $500,000
  • Loan term: 30 years
  • Monthly repayment: $1,845

What a difference a year makes. Switching from a 3.74% rate to a 1.99% rate leaves you with repayments that are $467 lower per month. That's $5,604 a year.

Ready to refinance? Here's what you need to do

If you're thinking about refinancing, there are a few things you need to do first. Follow these steps and you'll be on your way to a better deal in no time:

  • Check your current interest rate. Find a recent home loan statement and check your interest rate.
  • Compare your rate. Look at some of the latest home loan offers and see how your rate stacks up. If there's a big difference, it's time to switch.
  • Crunch the numbers. Use a loan repayment calculator to see how much you can save by switching. Don't forget to look at any possible exit costs that come with leaving your current loan. If you're on a fixed rate, the breaking costs might be very high.
  • Talk to your current lender. Getting a lower rate on your current loan, or switching to a cheaper loan with the same lender, is easier than finding a new loan and lender. See if you can get a better deal, but make sure your lender knows you're willing to leave if there's a better deal elsewhere.
  • Find a new loan. If your current lender can't help, it's time to find a new loan with a lower rate that suits your needs. You also need to consider whether getting a fixed or variable rate is right for you. Currently, fixed rates are very low – even lower than variable rates in some cases. But these products are less flexible, and if rates fall even further, you'll be locked into a less competitive deal (although it's hard to imagine rates getting much lower than 1.99%).
  • Apply. You will need to gather all your paperwork (proof of income, bank statements) and submit an application.
  • Discharge your old loan. Once your new lender (hopefully) accepts your application, you'll need to notify your old lender and discharge your mortgage.

Switching is easier than you think. For a few hours spent researching and applying, you can save yourself thousands.

Compare some of the market's latest home loan offers

Data indicated here is updated regularly
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% p.a.
Offset account
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Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $250,000 or more can get up to $3,000 cashback (Other terms, conditions and exclusions apply). A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
Athena Variable Home Loan - Owner Occupier, P&I
2.59%
2.55%
$0
$0 p.a.
80%
Owner-occupiers with 20% deposits can get this competitive variable rate mortgage. $0 application fee and $0 ongoing fees.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.65%
2.66%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Bank of Melbourne Basic Home Loan - Special Offer (Owner Occupiers, P&I) LVR above 60% up to 80%
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $250,000 or more can get up to $3,000 cashback (Other terms, conditions and exclusions apply). A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR <=80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
HSBC Home Value Loan - Promotional Offer LVR 90% (Owner Occupier, P&I)
2.80%
2.81%
$0
$0 p.a.
90%
A competitive value home loan with no ongoing fee.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Hunter United No Regrets Home Loan - Owner Occupier
2.79%
2.79%
$0
$0 p.a.
90%
Home buyers can get a competitive variable rate loan with a 100% offset account and low fees.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.46%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Bluestone Prime Direct (Owner Occupier, P&I)
2.59%
2.63%
$0
$0 p.a.
70%
Bluestone's Prime Direct is a competitive variable rate home loan for borrowers with 30% deposits.
IMB Budget Home Loan - Special LVR <=90% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.78%
2.84%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
BankSA Basic Home Loan - Owner Occupier, P&I
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $200,000 or more can get can get up to $3,000 cashback (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
2.94%
2.95%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Owner occupier, P&I)
2.22%
2.34%
$250
$0 p.a.
90%
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)
2.49%
4.12%
$595
$0 p.a.
90%
Investors can take advantage of a short term fixed rate with no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.73%
2.78%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
2.29%
2.84%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Greater Bank Great Rate Home Loan - Discounted 1 Year Fixed LVR ≤80% ($150K+ Owner Occupier)
2.09%
3.53%
$0
$0 p.a.
80%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.
Well Home Loans Balanced Variable - LVR 90% (Owner occupier, P&I)
2.52%
2.55%
$250
$0 p.a.
90%
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month. Not available for construction purposes.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.41%
$395
$0 p.a.
80%
A competitive fixed interest rate loan with no ongoing fees. Requires a 20% deposit.
Well Home Loans Balanced Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.27%
2.34%
$250
$0 p.a.
90%
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
IMB Fixed Rate Home Loan - 2 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.39%
3.14%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online. Available with a 5% deposit.
Athena Variable Home Loan - (Owner Occupier, IO)
3.09%
2.74%
$0
$0 p.a.
80%
Owner occupiers can refinance to one of the most competitive interest-only rates in the market. No application fee and no ongoing fees. Refinancers only.
Well Home Loans Balanced Variable - LVR 80% (Owner occupier, P&I)
2.32%
2.35%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. Not available for construction purposes.
CUA Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier, P&I)
2.49%
3.99%
$600
$0 p.a.
95%
Pay no ongoing fees and lock in your rate for 3 years to organise your budget. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.44%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.47%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
Athena Variable Home Loan - Investor, P&I
2.99%
2.95%
$0
$0 p.a.
80%
Athena offers a competitive variable rate for investors. No ongoing fees and no application fee. Principal and interest repayments.
IMB Fixed Rate Home Loan - 3 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.39%
3.08%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.54%
3.98%
$595
$0 p.a.
95%
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)
2.44%
2.85%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
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