RBA remains unmoved by cash rate rumours

It seems slow and steady is still winning the race when it comes to the cash rate, with the Reserve Bank of Australia (RBA) announcing yesterday that the record low 0.1% figure was on hold for the 15th consecutive month. 

The central bank’s first cash rate announcement for 2022 comes on the back of plenty of rumours about when it will increase the record low rate.

But in his Monetary Policy Decision statement, RBA governor Dr Philip Lowe maintained patience was key to ensuring the best possible outcome for Australia’s economy.

Dr Lowe said while inflation had picked up faster than the RBA had expected, it still remained lower than in many other countries and was being affected by the recent COVID Omicron outbreaks, higher prices for petrol and newly constructed homes, and supply chain breakdowns.

“The headline CPI inflation rate is 3.5% (but) in underlying terms, inflation is 2.6%,” Dr Lowe explained.

“The central forecast is for underlying inflation to increase further in coming quarters to around 3¼ per cent, before declining to around 2¾ per cent over 2023 as supply-side problems are resolved and consumption patterns normalise.”

Dr Lowe reiterated that with all these points to consider, the RBA Board wasn’t prepared to increase the cash rate until actual inflation sat sustainably within its 2%-3% target range.

“While inflation has picked up, it is too early to conclude that it is sustainably within the target band,” he said.

Dr Lowe was pleased with the state of Australia’s labour market, which he said had recovered strongly, as well as the unemployment rate, which dropped to 4.2% in December. 

“The RBA’s central forecast is for the unemployment rate to fall to below 4% later in the year and to be around 3¾ per cent at the end of 2023,” he said.

Property experts cautiously positive 

The real estate industry is generally satisfied with the RBA’s first cash rate decision for 2022.

Dr Lowe admitted that while housing prices have risen strongly, the rate of increase has eased in some cities.

CoreLogic research director Tim Lawless concurred, explaining that while housing values continued to rise, the pace of this growth was gradually softening across most capital cities.

This is despite a small uptick in housing values last month when CoreLogic’s national measure of housing values rose by 1.1%.

While this figure was an increase of 10 basis points compared to December when the national index was up 1%, five of our eight capital cities recorded only a slight upward change to their monthly growth rate.

“Values are still broadly rising, but nowhere near as fast as they were in early 2021,” Mr Lawless said.

He pointed to the cost of new housing and higher rents as the key drivers of the higher core inflation reading over the December quarter.

However, this data was an indication of a stronger than forecast economic environment in 2022, he said, with the RBA itself acknowledging that key measures of the economy were performing better than expected.

We could see the RBA’s inflation and labour market mandates being met earlier than expected,” Mr Lawless explained.

He added that cash rates could still increase in 2022, despite the RBA’s insistence in December that this was unlikely to happen before 2023.

“A growing chorus of economic commentators are forecasting a rate rise later this year and financial markets have the first lift fully priced in by mid-year,” Mr Lawless said.

Even the chance that the cash rate may rise sooner than expected is a “downside risk to housing”, he said.

“Previous analysis from CoreLogic shows a strong inverse correlation between movements in the cash rate and housing values, albeit with the strongest correlation based on a lag,” he explained.

“But other factors are also likely to influence the trajectory of housing values.”

These factors include credit policy, which may tighten later this year, and housing affordability, Mr Lawless said.

“Also, although labour markets have tightened substantially, there is little evidence of a material flowthrough to wages growth,” he explained.

However, Mr Lawless added that several possibilities could help to offset a significant downturn in the property market as the result of a cash rate increase.

“As the economy strengthens and labour markets tighten, the risks around mortgage stress or default should lessen,” he explained.

“Open international borders will also help to support demand, initially from a rental perspective but in the longer term, for home purchasing as well.

“Additionally, housing inventory levels remain remarkably low across most jurisdictions which is adding some support for housing values.”

What’s next for mortgage holders?  

Firstly, with low interest rates potentially continuing well into 2022, there’s never been a better time to pay off your mortgage as swiftly as possible.

Alternatively, as Lending Loop recently recorded, you may want to consider refinancing your loan to achieve the best possible deal.

Also consider that even when the cash rate starts rising, changes to your mortgage won’t happen overnight with Mr Lawless explaining that it will take time for interest rates to normalise once they start rising.

This in turn will provide a low cost of housing credit for awhile.

Finally, remember that as we said at Christmas, no one has a crystal ball to ensure the future holds great things for you and your loan.

But we can give you great advice on what road to take with your loan in 2022.

Regardless of whether you’re a first-home buyer, property investor or someone struggling with a badly wobbling budget, rest assured, we’re your biggest supporter.

We won’t even insist you stop buying a morning coffee!

So give us a call today at Lending Loop.

 

 

Want to switch home loans? Here are some top tips for refinancing

More and more mortgage holders are looking for a better deal on their home loan.

According to ABS data, the total number of home loan customers who switched providers in 2020 increased by 27% – from 143,664 in 2019 to 182,016 in 2020.

And it is estimated that a further 200,000 Australian families switched lenders to save in 2021.

But there’s switching lenders the wrong way, and switching lenders the right way.

Fortunately, Laura Higgins, ASIC’s Senior Executive Leader Consumer Insights and Communication, recently shared some important tips with ABC radio, which we’ve compiled for you below.

 

1. See if your current lender can cut you a better deal

Here’s the thing about the big banks and home loans: customer loyalty is rarely rewarded.

In fact, the RBA found that for loans written four years ago, borrowers were charged an average of 40 basis points higher interest than new loans.

For a loan balance of $250,000, that could cost you an extra $1,000 in interest payments per year.

“Many times, new customers are offered a better deal than existing borrowers, so if you have a home loan that is a few years old you could potentially get a better deal that saves you thousands of dollars over time,” explains Ms Higgins.

“Even if you’re happy with your current lender, it’s worth checking you’re not paying for features or add-ons you’re not using.”

 

2. Don’t jump at the easy money: do the maths

There are a lot of incentives out there to entice you to switch mortgages quickly, such as cashback offers or very low-interest rates.

But Ms Higgins urges borrowers to closely compare these offers with the long term costs.

“For example, it’s worth doing the maths to ensure a cashback offer still puts you ahead over the long term when considered against other aspects of the loan, like interest rates and fees,” she explains.

“If you decide to switch lenders, you may end up with a longer-term loan.

It’s also important to consider whether lenders mortgage insurance or other costs, like discharge and loan arrangement fees, may be payable.

“These additional costs can outweigh the benefit of a lower interest rate,” she adds.

“A mortgage broker can also help you compare loans and decide whether to switch.”

Which is very true, if we do say so ourselves!

 

3. Consider switching to an offset account or redraw facility option

With interest rates so low, many borrowers are aiming to pay off their mortgage faster by making extra repayments.

“Interest rates may be low now, but probably won’t be this low forever. Making some extra repayments now can benefit customers in the long term,” says Ms Higgins.

But if you’re worried about tying up all your funds in your home loan, then you can consider switching to a mortgage redraw facility or offset account, which can allow you to make extra repayments but withdraw them if you need to.

“Either of these options might work for you depending on your goals,” Ms Higgins adds.

“Not all home loans can be linked to an offset account, and often those that can may have a fee charged or a slightly higher interest rate, so it’s worth making sure you’d be saving enough in there to warrant any extra costs.”

 

4. To fix the rate or not? Or both?

Last but not least, a refinancing tip that we think is worth considering in this climate of record-low interest rates (which probably won’t be around forever).

One of the most common ‘big decision’ questions we get asked when it comes to refinancing is: should I fix my home loan rate or not?

But did you know a third option exists?

Yep, you can fix the rate on some of your mortgage, but not all of it.

This allows you to lock in a low rate for a portion of your home loan, while also taking advantage of some of the flexibility that a variable rate can offer, such as the ability to make extensive additional payments.

If you’d like to know more about it – or any of the other refinancing tips in this article – then get in touch today.

We’d be more than happy to help you refinance your home loan, whether that be renegotiating with your current lender or exploring your options elsewhere.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Four key tips for helping you make the big home loan switch

There’s no better time than now to find a better deal on your home loan and we’ve observed the sharp rise in homeowners seeking to explore refinancing options since the beginning of the global pandemic.

And there’s good reason we’re seeing more and more mortgage holders seeking a better deal. With the total number of home loan customers who switched providers jumping by 27 per cent – from 143,664 in 2019 to 182,016 in 2020.

More than 200,000 Australian families are tipped to make the switch in 2021. But making the switch isn’t foolproof and there are common mistakes people make.

Laura Higgins, Senior Executive Leader Consumer Insights and Communication at ASIC, recently shared some important tips with ABC radio, which we’ve compiled for you below as well as some additional advice for good measure.

  1. GET A BETTER DEAL WITH YOUR CURRENT LENDER

When it comes to the big banks and home loans, it’s often the case that customer loyalty goes largely unrewarded. RBA data tells us that for loans written four years ago, borrowers were charged an average of 40 basis points higher interest than new loans.

So on a loan balance of $250,000, the reality is that it could cost you an additional $1,000 in interest payments each year.

“Many times, new customers are offered a better deal than existing borrowers, so if you have a home loan that is a few years old you could potentially get a better deal that saves you thousands of dollars over time,” Ms Higgins explains.

“Even if you’re happy with your current lender, it’s worth checking you’re not paying for features or add-ons you’re not using.”

  1. LOOK BEFORE YOU LEAP

Cashback offers and super low interest rates are just two ways lenders are enticing new customers to make the switch, which means you need to do your homework first to ensure you’re truly getting the best deal.

Glittery incentives are designed to entice customers to switch mortgages quickly, but Ms Higgins urges borrowers to look closely and weigh up the long-term costs.

“For example, it’s worth doing the maths to ensure a cashback offer still puts you ahead over the long-term when considered against other aspects of the loan, like interest rates and fees. If you decide to switch lenders, you may end up with a longer-term loan,” she said.

It’s vital to check whether you’re up for any other costs such as Lenders Mortgage Insurance (LMI) or discharge and loan arrangement fees, which can sometimes outweigh the benefit of having a lower interest rate.

“A mortgage broker can also help you compare loans and decide whether to switch,” Ms Higgins adds. 

  1. OFFSET BUT DON’T FORGET

If you’ve been lucky enough to put some savings away and are now eyeing off low interest rates, perhaps it’s wise to try and pay off your mortgage sooner rather than later.

And as Ms Higgins notes, “Interest rates may be low now, but probably won’t be this low forever. Making some extra repayments now can benefit customers in the long term.”

But if you’re not quite in that position and are worried about tying up all your funds in your home loan, perhaps consider switching to a mortgage redraw facility or offset account, which can help you to make extra repayments but still withdraw them if you need to.

“Either of these options might work for you depending on your goals,” Ms Higgins adds.

“Not all home loans can be linked to an offset account, and often those that can may have a fee charged or a slightly higher interest rate, so it’s worth making sure you’d be saving enough in there to warrant any extra costs.”

  1. TO FIX OR NOT TO FIX IS NOT THE ONLY QUESTION

One of the most common big questions we field relates to whether you should consider a fixed home loan rate or not, however it’s good to know there is another option available.

The good news is that you can also choose to fix the rate for a part of your mortgage, but not all of it. Doing this allows you to lock in a low rate for a portion of your home loan, while also taking advantage of some wriggle room a variable rate can offer, including being able to make extensive additional payments.

WANT TO FIND OUT MORE?

Now really is the time to get on top of your refinancing options and see how your loans can work for you, instead of you working for them – now and well into the future.  We would love to go over home loan refinancing options with you, whether that be renegotiating with your current lender or exploring your options elsewhere.

The importance of being ready for interest rate hikes

How well prepared are you for a rise in interest rates? While that may seem like an odd prospect for many of us after 18 consecutive cash rate cuts from the RBA, we always need to be prepared.

And when the big banks start showing signs, it’s time to consider what that might look like for you in a practical, month-to-month sense.

What would an interest rate rise look like for you and how much extra would a new mortgage holder expect to pay each month? 

RATE RISE PREDICTION:

While the RBA’s official position has been that it doesn’t expect to lift the lid on the cash rate until 2024, and this month held the rate at 0.10 per cent, there’s healthy speculation that the next rise in rates could arrive as early as 2022.

Westpac and the Commonwealth Bank have earmarked the period between late 2022 and early 2023 as a likely time when rates may start to spring up, with the official cash rate predicted to hit 1.25 per cent in the third quarter of 2023 and peaking in 2024.

Meanwhile, NAB increased its two, three and four-year fixed rates by up to 0.10 per cent for owner-occupiers paying principal and interest.

Banks have the ability to increase fixed rates as a method of heading off potential RBA rate hikes. In overall terms, this means that the shorter the length of term of the fixed rate that is increased, the sooner a bank is expecting the next increase in rates will be.

Generally, the shorter the term of the fixed-rate that’s increased (ie. if two-year fixed rates are raised), the sooner a bank may predict the next rate hike will be. And with economists at the big banks seeing that future in their crystal balls, how should you be planning to make the most of it and how much extra money should you be factoring into your monthly mortgage repayments if the official cash rate starts to rise?

THE HIP-POCKET IMPACT:

You’d have to cast your mind back to 2019 to find the last time that the RBA cash rate target was at 1.25 per cent. Although it wasn’t that long ago, it seems like a completely different world – before the global COVID pandemic appeared like an unwanted neighbour at a backyard barbeque.

So, just how much extra should the average mortgage holder expect to pay?

Modelling provided by Canstar showed that the average variable mortgage rate would jump from 3.21 to 4.36 per cent, based on the current gap between the two rates.

In plain English terms, this means that if you took out a $500,000 loan tomorrow, and the cash rate hit 1.25 per cent in 2024, the modelling estimates your monthly repayments would increase $300 to $2464 per month. Commonwealth Bank’s modelling covers a similar scenario, with repayments up $324 per month.

That’s despite shrinking your remaining loan balance to $468,770 after three years of repayments, and assuming the banks only add on the cash rate increase – and not any extra. On top of that, there’s also the possibility that even more waves of RBA cash rate increases could soon follow.

So if the average variable loan rate increased to 7.04 per cent in 2031, where it was not that long ago back in 2011, Canstar estimates that same borrower who took out a $500,000 loan would pay $900 more in monthly repayments than they do now, even after a full decade’s worth of repayments.

TAKE OUT THE GUESSWORK:

Every household is different, in unique situations and you can’t take a one-size fits all approach. Let us run you through your options and help you find the right mortgage option for you.

It may be difficult to imagine that interest rates could rise from the relaxed position of the current record low cash rate, however it’s vital to pay close attention. We had 18 cash rate reductions before the RBA increased the cash rate to 4.75 per cent back in November 2010.

It pays to look ahead, if you’re worried about what such a scenario could mean for you and your home budget in the coming years, get in touch with us today and we can run you through a number of options that include (but are not limited to) fixing your interest rate for two, three, four or five years, or just fixing part of your mortgage (but not all of it).

How you can simplify debt and save at the same time

If you’re like most Aussies, you’re probably paying off more than one loan.

Whether it be a mortgage, a car loan, a credit card, a personal loan – or even all four (gulp!) – keeping track of what needs to be paid and when can be difficult. 

If you add in changing interest rates and the need to make milestone purchases, you wouldn’t be the only one to find yourself, and your finances, under quite a bit of stress.

The good news is that you don’t have to don a clown suit and keep all of those loan repayments in the air, as there are solutions available to help you manage your money, and your repayments, better.

In a nutshell it’s called debt consolidation, and it has the power to take the pressure off your finances.

Debt consolidation essentially means rolling all of your existing loans into one easy-to-manage loan. Let’s take a look at some of your options:

ROLL UP, ROLL UP!

One of the most common ways to consolidate debt is to take out a new personal loan and use that to pay off your existing debts.

Importantly, the interest rate on your new personal loan must be lower than the rate on your existing debts, such as a credit card with a 17.99% interest rate. 

This will mean you pay less interest each month and you can either use the funds you save on other things or put the money back into paying the loan principal so that you pay off what you owe faster (and save more interest again!)

Another benefit is avoiding costly late payment fees many credit cards have and with just one loan to keep track of, you’ll be able to budget a lot easier and have a clearer picture of when you’ll be debt-free.

HIT A HOME RUN

Another option is to refinance your home loan to consolidate your debts, including car loans and credit cards, into your mortgage.

Mortgages offer comparatively low interest rates, so consolidating your loans in this way will reduce your monthly repayments and cut down the time and energy spent on managing multiple loans. 

It’s important to note, however, that while this option can help ease the pressure on your finances now by reducing monthly repayments, consolidating your debt through your mortgage can extend the term of your loan, which may have previously been much shorter.

This means unless you aim to make a lot of extra repayments as soon as possible, you may wind up paying a lot more interest than you bargained for.

One way to address this is to create a loan split for the debt consolidation, which enables you to pay off short-term debts within a few years, rather than over the existing long-term home loan period, which is usually 25 or 30 years.

With mortgage rates down due to the RBA’s official cash rate being at record low levels, it’s a good time to see how you can consolidate and take back control of your debt.

That’s where we come in:

Get in touch with us today to find out how we can help you explore your debt consolidation and refinancing options. We’re here to make the whole process as simple and cost effective as possible.

At present, lenders are providing mortgage holders impacted by COVID-19 with a range of hardship support measures, including loan deferrals on a month-by-month basis.

Whatever your circumstances, we’re here to support you however we can through these times.

Why refinancing your home loan makes sense and saves dollars

It’s no secret that many Australian households are going through tough times against the backdrop of a global pandemic, challenging economic conditions and a rapidly rising housing market.

However, it’s not all doom and gloom – you can relieve some strain on your family budget by reducing the cost of monthly mortgage repayments and Aussies across the nation are jumping aboard this trend.

Aggressive competition among lenders and an all-time low RBA (Reserve Bank of Australia) cash rate of 0.1 per cent, following six rate cuts in three years, have all been strong drivers alongside record low interest rates.

According to the Australian Bureau of Statistics (ABS), refinanced home loans recorded an all-time high of $17.2 billion in July, a jump of 6 per cent compared to June and more than double the value of refinanced homes in July 2019.

Katherine Keenan, Head of Finance and Wealth at ABS, noted borrowers were taking advantage of the shift with the surge likely to continue as lockdowns due to COVID-19 put even more pressure on homeowners.

“Borrowers are seeking out lower interest rates, particularly for fixed-rate loans and cashback deals across a large number of major and non-major lenders,” she said.

The good news is homeowners are in a powerful position, with plenty of competition among lenders offering record-low home loan rates.

According to comparison website RateCity, the number of variable rates under 2 per cent on its database climbed from 28 to 46 in just two months.

This competition for your mortgage means homeowners can pick and choose the best loan, and even negotiate with their existing lender to get a better deal.

The ABS reports borrowers are also opting to lock in their interest rate, too, following news that lenders have begun to increase the rates on 3-5 year fixed-rate loans.

HOW TO REFINANCE THE RIGHT WAY:

One of the most common ways homeowners can get themselves a better deal is refinancing through their existing lender. 

What many don’t know is that lenders won’t automatically gift wrap and hand you their cheapest rate. 

Just as you have to negotiate with your phone or electricity provider for an updated plan, you need to ask your lender to cut your home loan rate.

If you’re not someone who is keen on negotiating, never fear, that’s where we come in. 

We understand that refinancing isn’t a one-size-fits-all solution and we can help you get the best deal and put dollars back in your pocket, not the lender’s.

Turning to an expert for guidance can also help you analyse whether fixed-rate loans or cashback deals would suit your situation.

They may look appealing on the surface, but if you dig a little deeper, you may find that your position calls for a more considered approach.

We can help you work through the fine print, fees and limitations that might exist within these loan options to help you determine whether a fixed, variable or split loan is better suited to your needs.

Get in touch with us today to find out how we can help you save thousands of dollars in interest repayments on your mortgage.

Prime time to capitalise on home refinancing options

In times of global change and uncertainty it’s the perfect time to look at options in reducing costs related to, for most Australians, their greatest asset, the family home.

And in a hazy financial climate spurred by a world pandemic, the home has become an even more important asset to consider. It’s not just a place to eat, sleep and relax, but a private sanctuary from the outside world and, for many in the grip of lockdowns, a central working environment.

The good news is that times of uncertainty can provide a great opportunity to tweak refinancing options to your advantage. The array of social and financial changes thrust upon us recently have combined to make now a good time to crack out the calculator. 

But where do you start and what should you be looking to do to fully optimise your home loan?

PAYMENT RELIEF:

When was the last time you refinanced your home loan? Even 12 months ago, the finance and lending landscape was in a much different space and options may have drastically changed since then.

A recent RBA study found that borrowers who refinance with another lender or negotiate a better deal with their existing lender, see interest savings.

Many Australians have been significantly impacted by reduced working hours and other COVID-related factors, making it a challenge to meet monthly mortgage repayments. It may just work out that refinancing is a more suitable option than applying for a hardship variation on your loan.

DEBT CONSOLIDATION:

It’s not just your home you should factor in when looking to refinance, it can also help by consolidating your other existing debts, including credit cards, car and personal loans, by combining them into a refinanced mortgage.

This strategy means just one simple repayment to make each month which can help reduce the risk of late, forgotten payment dates and incurred penalty fees. Plus your debts will be charged at your home loan interest rate – which is usually lower than credit card rates, for example.

TIME IS ON YOUR SIDE:

Typically, having the time and capacity to look into refinancing options are the main reasons why people don’t look into refinancing earlier.

And with more and more of us spending more time at home due to the pandemic, it can be valuable to use some of the time usually taken up by social commitments to explore how you can better your financial position.

HELP IS AT HAND:

It can seem daunting at first, but looking into your refinancing options may just be the best use of time you can spend during lockdown.

 And the good news is you’re not alone. We’re here every step of the way, available to help you whenever you need and in these difficult times, we know that we need to support each other now, more than ever.

Get in touch with us today to help you navigate hardship variations, or support package options which may be available.

Are you too loyal for your own good? The banks think so

What’s the loyalty tax?

It’s this sneaky lender trick where borrowers with older mortgages are typically charged a higher interest rate than borrowers with new loans, and it was confirmed in a study by the Reserve Bank of Australia (RBA) last year.

You see, the banks don’t think you’re paying attention, and as such, they only offer their lowest rates going to new customers in a bid to win them over.

For example, RBA June 2021 figures show the average difference in home loan interest rates between new and existing owner-occupier borrowers was 0.46%.

On an average loan size of about $400,000, that 0.46% difference on a 30-year loan means a borrower would pay an additional $37,462 in interest over the life of the loan.

That’s $1,249 per year, per household.

Athena Home Loans research estimates this costs Australian households a total of $9.1 billion per year.

 

Borrowers feeling ripped off and angry

It should come as no surprise then that 91% of borrowers want new and existing customers to receive the same rate, according to a survey of 1,000 homeowners undertaken by CoreData and commissioned by Athena.

The vast majority of those surveyed say they also feel “ripped off” (82%), “angry” (74%), and “outraged” (72%) at the opaque pricing practice.

“We know transparency is at the heart of trust. There is an enormous opportunity for those lenders with clear pricing and a simple value proposition,” says CoreData Global CEO Andrew Inwood.

 

You don’t need to feel trapped

Now, the ACCC published a report in December 2020 with several recommendations to prevent this unfair practice, but nothing much has come of it since.

Meanwhile, more than half (56%) of those surveyed in the CoreData report say they feel trapped in their current deal, while one in three people (36%) asked their lender for a drop in their interest rate but were rejected.

But with competition among lenders quite fierce right now, it’s important to know the power is in your hands.

“Rates are at an all-time low at the moment, so it’s at a crucial time when Australians need the money in their pockets, not the banks,” explains Athena CEO and Co-Founder Nathan Walsh.

Adds the RBA: ​​“Well-informed borrowers have been able to negotiate a larger discount with their existing lender, without the need to refinance their loan.”

 

There’s no loyalty tax with us

We like to reward loyalty around here. We’ll always have your back.

So, if you haven’t refinanced recently, get in touch today and we’ll work with you to help save you thousands of dollars in interest repayments.

That might involve renegotiating with your current lender, or looking around for another lender who will give you a fairer rate.

Either way, we’ll make sure your lender isn’t taking advantage of your loyalty.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Refinancing figures are on a record-breaking run: here’s why

We’re currently seeing more people refinance their home loans than ever before, and the latest ABS figures out this week prove we’re not imagining things.

Refinanced home loans reached an all-time high of $17.2 billion in July, which is a 6% increase on June.

It’s also more than double the value that was refinanced exactly two years prior in July 2019.

 

So why are homeowners refinancing in record numbers?

For starters, the RBA cash rate is at an all-time low of 0.1% following six rate cuts in three years.

As such, competition amongst lenders is fierce, with many offering record-low home loan rates in a bid to win over as many customers as possible.

In fact, RateCity reports the number of variable rates under 2% on its database has jumped from 28 to 46 in just two months.

Borrowers are also opting to lock in their interest rate too, says the ABS, following reports that lenders have started increasing the rates on 3-5 year fixed-rate loans.

“Borrowers are seeking out lower interest rates, particularly for fixed-rate loans, and cashback deals across a large number of major and non-major lenders,” says ABS head of Finance and Wealth, Katherine Keenan.

COVID-19 is likely increasing the number of homeowners refinancing, too.

With many households and businesses around the country doing it tough right now, one simple way to reduce your monthly mortgage repayments is by refinancing.

 

How we help you refinance the right way

Now, fixed-rate loans and cashback deals might look super appealing at first glance, but they might not always be the best fit for your situation.

And that’s why it helps to have someone like us in your corner.

We can help you go through the fine print, fees and limitations that might exist within these loan options.

We can also help you determine whether a fixed, variable or split loan is better suited to your needs.

The other thing we’re great at is negotiating with your lender.

Your current lender won’t automatically give you their lowest rate going. You’ve got to ask them for it.

And you’ve also got to make it clear that if they don’t reduce your interest rate, you’re willing to find another lender who will.

This can be both intimidating, not to mention time-consuming and frustrating if they don’t want to play ball.

But lucky for you, we can do the leg-work for you.

So if you haven’t refinanced in the past few years, get in touch with us today and we could help you save thousands of dollars in interest repayments on your mortgage.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How to ease financial pressure through debt consolidation

Here’s a quick experiment.

Go pick up three balls and try to juggle them. Most people, besides those who ran away to join a circus, will likely drop at least one of them within a few tosses.

Now put two of the balls aside and throw the remaining ball up and down (with one or both hands).

Much easier to manage, right?

Well, it’s not too dissimilar to the concept of debt consolidation.

If you have more than one loan – be that a credit card, car loan and/or a personal loan – you can help reduce the stress of juggling multiple debts, payment dates and interest rates by rolling them into one easy-to-manage loan.

 

There are other benefits, too

One common debt consolidation method is to take out a new personal loan and use the funds to pay off your other existing debts.

Now, if the interest rate on the new personal loan is lower than the rate on your existing debts (for example, a credit card with a 17.99% interest rate) this can help you pay less interest each month – not to mention avoid the nasty late payment fees that come with those kinds of cards.

And by rolling all your debts into one, you can get a clearer timeline of when you can be debt-free.

Debt consolidation can also make it easier for you to manage your household budget, as you only need to factor in repayments for one debt per month instead of many.

 

Refinancing your home loan for debt consolidation

Another method people use for debt consolidation is rolling it into a refinanced home loan because mortgages offer comparatively low-interest rates.

So if you’re really struggling with multiple debts right now – such as a car loan or a number of credit cards – consolidating your debts into your home loan will, in most cases, reduce your overall monthly repayments.

However, here’s a big word of warning.

While this option can reduce your monthly repayments now, debt consolidation through your mortgage can turn a short-term debt (like a personal loan) into much longer-term debt.

As such, unless you aim to make a lot of extra repayments as soon as possible, you could end up paying significantly more interest than you would have otherwise.

One way to address this issue is to create a loan split for the debt consolidation, giving you the ability to pay off all the short term debts within a few years, rather than, for example, over a 25-year home loan period.

So if you’re in need of breathing space now, debt consolidation is an option to consider – especially with mortgage rates so low at present due to the RBA’s official cash rate being at record low levels.

 

Get in touch today

If you’d like to explore your debt consolidation or refinancing options, then get in touch with us today and we can help you look at ways to take some financial pressure off your shoulders.

It’s also worth noting that lenders are providing mortgage holders impacted by COVID with a range of hardship support measures, including loan deferrals on a month-by-month basis.

Whatever your circumstances, we’re here to support you however we can through these times.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.