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Interest rates are on the rise. Is now the time to refinance?

When was the last time you refinanced your mortgage? 

Is it coming up for renewal soon?

If the answer is “never”, or you cannot remember, it is likely that you are being charged a higher interest rate than necessary because of the “loyalty tax”.

Research by the RBA found that banks only offer their lowest rates to new customers in a bid to win them over because they know you’re not paying attention.

An analysis conducted by RateCity found that customers who maintain their loyalty to their bank could end up paying an additional $5,101 in interest over the next three years (based on a $500,000 loan taken out with CBA in 2019). 

Australian Bureau of Statistics reports that owner-occupier refinancing rose 9.7% in June to a new record high of $12.7 billion and it’s no wonder why!

Are you paying too much by staying with your original lender?

As you might have seen in the news, the four major banks are predicting that the Reserve Bank of Australia’s (RBA) official cash rate will rise from 1.85% in August to somewhere between 2.60% (as forecasted by the Commonwealth Bank) and 3.35% (as forecasted by the ANZ) by November.

This means that if interest rates rise, you will need to meet a higher standard of home loan affordability when refinancing. Also known as “home loan serviceability”, it’s your ability to meet your home loan repayments with an interest rate that’s 3% higher than the rate you’re being offered. So, the sooner you refinance the lower the hurdle you will have to jump to ensure you’re not stuck with your current lender. 

Explore your refinancing options with the team at Broad Finance!

Even if you’re not interested in working with another lender, you can always ask your current lender to review your rate. This demonstrates that you’re willing to refinance if they don’t make an effort to keep you as a customer. Loyalty should be a two-way street! So, if you’d like to learn more about your options, reach out and get in touch. Our experienced team of mortgage brokers are on your side and wants to help you as much as we can during this time.

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal, nor to imply any recommendation or opinion about a financial product. It does not consider your personal situation and may not be relevant to circumstances. Before taking action, consider your 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.

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