Cash-strapped Aussies are tipped to rush out and refinance their home loan, should the Reserve Bank of Australia cut interest rates again on Tuesday.
Fresh data released by Mortgage Choice shows there was a 22 per cent spike in the number of Australians looking to refinance over the June quarter thanks to an interest rate cut in May.
Mortgage Choice chief executive Anthony Waldron says the same could happen if the RBA reduces the official cash rate on Tuesday after its August meeting.
“The Reserve Bank is expected to deliver another cut to the cash rate at its August meeting, which should encourage more borrowers to see if they can access a better rate on their home loan,” he said.
“This aligns with findings from the survey data, which show that 72 per cent of homeowners review their home loan at least once a year, up from 59 per cent a year ago.”
According to Mortgage Choice, 49 per cent of Aussies chose to refinance their mortgage to lower their interest rate, while 11 per cent wanted to consolidate debts and 10 per cent wanted to lock in a fixed rate or switch from fixed to variable (or vice versa).
Separate data released by the Australian Bureau of Statistics shows over the first quarter, $60bn worth of home loans with an estimated 97,835 loans were refinanced with a new lender.
That’s a 3.1 per cent increase in both the value and number compared with the December quarter.
The next quarter stats are due out on Wednesday.
Should Aussies refinance
Mortgage holders who can afford to keep up with their repayments could be thousands of dollars better off in the long-term.
Research released by Canstar shows the average Australian borrower with $600,000 debt could save $272 a month on their repayments if there is a third interest rate cut.
But if that same owner kept the additional $272 a month on their mortgage, they could be out of debt three years and three months earlier.
They would also pay $76,536 less in total interest over the life of their loan.
Australians are being reminded of the benefits of paying more than needed on their monthly repayments ahead of Tuesday’s highly predicted rate cut.
At the time of writing, the money market had factored in a near 95 per cent chance of rate cut, when the central bank announces their cash rate decision at 2.30pm.
Canstar data insights director Sally Tindall said while a predicted third interest rate cut “will give real relief” to struggling households, those in a financial position could be significantly better off if they hold their payments.
“For those managing to hold their budgets together, consider keeping your repayments exactly the same,” Ms Tindall said.
“Every rate cut is another opportunity to invest back into your mortgage and potentially be debt-free months, if not years early.”
Originally published as Mortgage holders flock to get their loan refinanced on much needed rate relief