The Reserve Bank hasn’t altered interest rates since August 2016, yet many mortgage lenders have started imposing out-of-cycle rate hikes on borrowers.
The lenders will often argue that the out-of-cycle rate hikes are needed to protect their profits and to keep their shareholders happy. As a profit making institution, a bank will always rank shareholder returns above more competitive mortgage interest rates for its customers.
However, as a customer, there is nothing stopping you from shopping around for an improved home loan interest rate. In fact, if you are paying more than 4.5% in interest on your mortgage, then you’re probably paying too much. And if you decide you are paying excessively high interest rates, then it’s time to consider ‘refinancing’ with another lender. Simply put, refinancing lets you change your home loan to suit your new circumstances.
But before switching, be aware that our financial services division, Our Broker offers a complimentary home loan health check. As a mortgage broker, we have an obligation to check for more favourable rates with other lenders for you, and whether there are any mortgage break costs you might have to pay if you switch your mortgage away from your current lender.
Apart from cheaper interest rates, refinancing your mortgage can provide an opportunity to streamline multiple debts through the process of ‘debt consolidation’. By folding several high interest debts such as a credit card or personal loan into one lower rate debt – which could be your home loan, it’s possible to trim your total monthly debt repayments. Moreover, you might be able to use these additional savings to pay off your home loan faster.
As part of the refinancing process, be sure to compare the ‘comparison rate’ against the ‘advertised rate’. The comparison rate will give you the true cost of refinancing the loan, including fees and charges. A financial specialist from Our Broker will be able to walk you through the best way to compare home loans before you settle on a refinancing option.
To find out more about how to refinance your home loan or the benefits of a debt consolidation, contact Our Broker on 1800 913 677.