by Holly Jones
For the seventh month in a row, the Reserve Bank of Australia have kept rates on hold at 2.50% p.a.
Financial comparison site RateCity suggests this may be an encouragement to some to get a better deal on their home loans, with fixed rates advertised at 3.99%.
Analysis of the Australian Bureau of Statistics figures, by RateCity, shows the number of owner occupiers refinancing their home loans was up by 17% to $27 billion in the first half of the 2013-14 financial year.
CEO, Alex Parsons says borrowers are demanding lower rates and saving thousands of dollars by doing so.
“Borrowers are no longer waiting around for the Reserve Bank to give them a rate cut. Instead, they are taking the bull by the horns and getting a discount for themselves,” he said.
“If the RBA had cut rates by 0.25% points today, that would have put an extra $528 a year back in the pockets of borrowers with the typical $300,000 home loan, which is great. But a discount of almost four times that – close to $2000 per year – is possible if you switch from the average to one of the lowest standard variable option.
If the RBA cut rates by 0.25% today, it would have put an extra $528 a year back in the pockets of borrowers
Parsons has a valid point. While many may not realise it, a small cut can make a big difference to people’s repayments over the years. Over 25 years, cutting 1% is a saving of almost $50,000 on the average $300,000 loan – a sum not to be scoffed at.
Parsons commented: “A borrower can get an interest rate under 4% if they fix for one year, and lowest variable rates are hovering just above that, so go out and take advantage of record low rates while you still can.”
RateCity research also shows that the number of Australians refinancing has steadily increased over the past few decades.
“Refinancing has particularly gone up over the past 20 years,” he said. “It’s becoming easier for people to get information about home loans and they are always looking to get a better deal.”