Borrowers considering refinancing loans in the wake of 10th rate rise
Thousands of mortgage holders are now planning to refinance their loans in the wake of the Reserve Bank of Australia's latest cash rate hike, data has revealed.
The central bank increased interest rates by 25 basis points yesterday bringing the nation's rate to 3.6 per cent – the highest rate since 2012.
The tenth consecutive interest rate rise is bad news for borrowers whose monthly repayments on a $500,000 loan have increased by $1051 since April 2021.
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A Finder survey of 1054 people, 313 of whom have a mortgage, revealed one in five borrowers are planning to refinance their home loan by July.
Finder equates this to around 594,000 mortgagors nationally.
A further 15 per cent, around 495,000 borrowers, said they would consider refinancing if the central bank hits mortgage holders with another interest rate rise in April.
Borrowers claim they're looking for a cheaper interest rate, offset accounts and sign up cash bonus by refinancing.
There is also a generational divide between those looking to refinance their current loans, Finder says.
23 per cent of millennial homeowners are planning to refinance in the next six months compared to just 4 per cent of baby boomer borrowers.
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Home loans expert Richard Whitten said lenders should anticipate an influx of borrowers hunting for a better rate as big banks are expected to pass on the central bank's increase.
"While most borrowers are looking for a better deal and are not in mortgage stress, thousands of homeowners are struggling right now, being forced to fork out thousands more on their mortgages," Whitten said.
"Many are looking for relief; some are missing meals or bills and are looking at the possibility of losing their homes."
A total of $17.8 billion worth of home loans have been refinanced over the past 12 months which is a 4 per cent increase on the year prior, Australian Bureau of Statistics data showed.
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The pressure of rising rates means more Aussies are thinking about switching to a more competitive rate to ease pressures on their households, Whitten said.
"The mortgage is often the biggest household expense and also the greatest opportunity for savings," Whitten added.
"Even loans that are less than 12 months old need to be re-evaluated.
Whitten said those worried about missing a payment due to financial pressures should talk to their lender as soon as possible to avoid any impact on their credit score.
"It's better to negotiate some kind of hardship arrangement or a repayment holiday than to simply stop repaying the loan. This harms your credit score and puts you at risk of a default," Whitten said.
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