In search of a better deal

When switching mortgage providers, take the time to ensure the new offer is as good as it looks

- NICOLA FIELD

It was the year of the “big switch”. In the 10 months to November 2021, $150 billion worth of home loans were refinanced – about $10 billion more than for the whole of 2020. If you’ve had the same loan for a few years, now could be the time to move to a new lender – and it can be easier than you think.

“We’ve seen refinancing snowball through Covid,” says Scott Adams, a Sydney-based senior mortgage broker with Aussie Home Loans. “It’s been driven by a big uptick in property values, a dramatic fall in fixed rates and the availability of refinancing rebates – also known as cashback deals – which have been worth $2000 to $4000.”

He says most homeowners are refinancing to make the most of their equity. “Refinancing purely for a dollar-for-dollar swap to get a better rate is not unusual,” he says. “But more commonly, people have an additional goal in refinancing, such as opportunities to consolidate debt or release home equity to buy a new car or investment property.”

New customers favoured

It’s no secret that lenders save their best deals for new customers. “Banks rely on customers who don‘t switch – the ‘complacent’ borrower. These customers are paying a higher rate than new customers,” says Jack Talbot, director of broking firm Leverage Capital.

Reserve Bank data shows the average variable rate on existing loans is 3%. For new loans the average is 2.63%. The 0.37% difference can see refinancers save close to $100 each month on a $500,000 loan, and shave almost $29,000 off the total interest cost over 25 years.