Record number of Victorians rush to refinance: How to get the best mortgage deal possible

A record number of Victorian households are switching home loan providers as soaring repayments wring out wallets.

But one in five of the state’s mortgage holders still has “no idea” what their interest rate is.

Latest Australian Bureau of Statistics data shows a record 8115 Victorian owner occupier households refinanced to another provider in June, topping the previous monthly record of 7420 set in May.

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That June number totalled $4.24bn of owner occupier external refinancing cleared in Victoria — another record for a month.

It comes as Finder research shows 14 per cent of the state’s homeowners have refinanced their loans in the past six months, with another 13 per cent planning to do so in the next six. Almost one in five are on a fixed rate home loan, but the best time to lock one in is now long gone, with the Reserve Bank stacking 0.5 per cent to the cash rate for three consecutive months to bring it to 1.85 per cent.

A three per cent cash rate, as has been widely tipped for the end of the year, would whack another $310 per month onto a $450,000 loan, $415 onto $600,000 and $518 monthly onto $750,000, according to PropTrack analysis assuming a current interest rate of 4.12 per cent.

Masters Broker Group director Mario Borg said it was “definitely harder” to refinance now than it had been over the past few years — even if not asking for more money.

“The qualifying rate has naturally gone up from what it was in the last few years because the cash rate has gone up, so interest rates have gone up,” he said.

“The qualifying rate is what banks are judging you on to ensure you can afford the loan. It’s not just the interest rate, they have a safety buffer to make sure you can weather it as interest rates go up … this is generally around 3 per cent on top of the actual interest rate.”

Mr Borg said this meant “you may be stuck with your current lender for now” and also noted “now would probably be the wrong time to be fixing” with expected future rises factored in.

“The train’s left the station in that instance … but, for the piece of mind, for a certain person that might be worth it to them. Specific and personalised advise is the most important thing.”

The traffic to comparison website Finder’s ‘best home loans’ page has more than doubled since last year as frantic homeowners try to save where they can amid surging cost of living.

More Australians are also turning to mortgage brokers, with 69.5 per cent of all new home loans facilitated by brokers in the March quarter — up 12 per cent year on year — according to the research commissioned by the Mortgage and Finance Association of Australia.

Finder Home Loans expert Richard Whitten said Australians were “rushing to refinance as interest rates continue to rise” and the figures showed many weren’t on the best deals.

“Households are in a dire position as they struggle to cope with the worst cost of living crisis we’ve seen in years,” he said.

“The multiple rate increases from the Reserve Bank began in May, but many borrowers will be feeling the full effects now and in the months ahead.

“It wouldn’t surprise me if even more borrowers refinance in the near future.”

According to a recent Finder survey, 21 per cent of Victorian mortgage holders “have no idea” what their home loan interest rate is.

Mr Borg said refinancing or getting a home loan was much more complex than it was in the past, with so many different lenders and, within that, different approaches to taking on risk, so “a specialist is the best person to help you through the maze of obtaining a home loan”.

He said loan structure was “equally if not more important than the rate itself”.

“That could be that you might have an offset home loan, vs. a neighbour who doesn’t need an offset home loan, or someone who has a split loan that is part fixed and part variable because they want that certainty,” he said.

“The wrong structure actually could cost more in the long term even though you might think you’ve got a better interest rate.”

Lendi chief executive David Hyman said about $130bn worth of fixed-rate loans nationwide were due to expire from mid-2023, at which point a mortgage’s fixed rate would move to a ‘revert rate’ — incurring significant monthly increases in repayments.

He advised these homeowners to “act now”.

“Don’t stick your head in the sand … and certainly do not assume,” he said.

“Find out your mortgage’s fixed and revert rate terms (and) consider steps to protect yourself from significant monthly interest increases when your fixed rate expires.”

TIPS FOR GETTING THE BEST HOME LOAN

– See if you can get a better rate with your current provider

– Compare it to other offers online and shop around for new deals

– Seek specialist advice from a trusted professional

– Remember fees might lie behind attractive headline rates

– Consider loan structure

TIPS FOR USING A MORTGAGE BROKER

– A recommendation by a trusted friend

– Find someone who is experienced

– Provides proper service; returns calls and emails

– A member of one of the industry peak bodies: MFAA and FBAA

– Research, check Google reviews

SAVVY SAVINGS

Sarah and Corey Skinner recently refinanced, saving themselves an extra $1000 per month.

The couple first looked into switching up their finances after the arrival of their three-month-old daughter, Everley and being wary of recent interest rate hikes.

Ms Skinner said switching banks from “one of the big four” to Bankwest, through recommended mortgage broker Tom Carmody, played a major part in their savings, due to the bank’s lower rates and various offset account options.

“We realised we were paying too much and especially with bub on the way, we started thinking about where our money was going,” she said.

“We figured with our mortgage being one of the biggest bills, that was a good place to start.”

The Skinners have also implemented everyday strategies to save costs, including shopping for groceries online to avoid “those extra bits and pieces you pick up when walking down the aisles” and also changing their car loans, which brought their insurance premiums down.

They bought their Rowville home in 2020 for $800,000.

— with Emily Holgate

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