As we approach the summer break of 2024-2025, it’s an opportune time for homeowners to consider refinancing their mortgages. Recent data suggests that exploring refinancing options could lead to significant savings, especially for those who haven’t reviewed their home loans since interest rates began rising.
Current Refinancing Landscape
- Over 28,000 Australian homeowners refinanced their home loans in June 2024
- By June 2024, 98.2% of new home loans were variable rates, with only 1.8% being fixed rate
- The average interest rate for fixed home loans (1-3 years) for owner-occupiers stood at 6.01% per annum in September 2024, while the average variable home loan rate was slightly higher at 6.05% per annum
Why Consider Refinancing Now?
- Potential Savings: Many borrowers who haven’t refinanced in the past 12 months may have paid nearly $6,000 more in interest during that period.
- Increased Home Equity: National home prices increased by 5.5% in 2024, potentially increasing your home equity and improving your refinancing options
- Lender Flexibility: Some lenders may now use a lower loan serviceability buffer (as low as 1%) for refinancers with a solid repayment history.
- Market Competition: With rate cuts anticipated in early 2025, lender competition could intensify, potentially leading to better refinancing deals
Overcoming Refinancing Barriers
While some borrowers face challenges in refinancing, it’s worth reassessing your situation:
- 5% of borrowers who tried to refinance in 2024 lacked sufficient home equity.
- Another 5% didn’t meet bank requirements.
- 17% of borrowers surveyed by Canstar believed refinancing was “too much like hard work”
However, these barriers may be surmountable with professional assistance and a fresh evaluation of your financial situation.
Steps to Consider
- Review Your Current Loan: Understand your current interest rate and loan terms.
- Assess Your Financial Position: Consider changes in your income, expenses, and property value.
- Explore Options: Investigate current market offerings and compare with your existing loan.
- Seek Professional Advice: Consult with a mortgage broker to navigate the refinancing process and find suitable options.
Remember, refinancing doesn’t always mean switching lenders. In fact, more than one in five borrowers successfully negotiated a better interest rate with their current lender in the past year
.As we head into 2025, taking the time to review your mortgage could lead to substantial savings and improved financial health. Don’t let the perceived complexity of refinancing deter you from potentially beneficial opportunities.
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