Variable-rate mortgage holders who are waiting for relief from the Reserve Bank of Australia (RBA) might find themselves needing to explore alternative solutions. With the RBA signaling that a rate cut is unlikely this year, homeowners with variable rates may need to be proactive in reducing their monthly payments.
If you’re a homeowner looking to save on your mortgage, you might need to negotiate a better rate with your lender or consider refinancing to a more competitive deal.
The Current Mortgage Landscape
The average variable mortgage rate for owner-occupiers, as reported by the RBA, is currently sitting at 6.37%. While that number might seem daunting, it’s important to remember that there are options available to you.
“Homeowners, especially those with good equity in their property, should be aiming for a mortgage rate that’s below this average,” says mortgage expert John Doe from BOA & Co. “Ideally, you want a rate that starts with a 5.”
If you manage to secure a rate cut of half a percentage point from 6.37% to 5.87%, for example, you could see significant savings on your monthly repayments. For a $600,000 mortgage with 25 years remaining, this could reduce your repayments by $184 a month. For a $1 million mortgage, that reduction could be as much as $307 a month.
Options for Reducing Your Mortgage Rate
1. Negotiate with Your Current Lender
Haggling with your current lender can be an effective way to get a better rate. Lenders are often willing to offer more competitive rates to retain existing customers, especially if you have a good repayment history and strong equity in your property.
2. Shop Around for Better Deals
If your lender isn’t budging, it might be time to shop around. There are plenty of smaller banks, credit unions, and non-bank lenders offering variable rates below 6%. While switching lenders might seem daunting, the potential savings could make it worthwhile.
However, if you have less than 20% equity in your property, refinancing may come with additional costs, such as lenders’ mortgage insurance (LMI). This insurance can be expensive, so it’s important to weigh up the costs before making a decision.
3. Factor in Switching Costs
When considering refinancing, don’t forget to account for potential costs like discharge fees from your current lender, government fees, and any upfront fees from the new lender. While these costs can add up, they shouldn’t deter you from exploring better mortgage rates. In many cases, the savings from a lower interest rate can outweigh the costs of switching in just a few months.
John Doe advises, “Always do the math before making a decision. Sometimes, negotiating with your new lender can help reduce or even eliminate some of these fees, further enhancing your savings.”
Need Help? BOA & Co. Is Here for You
At BOA & Co., we specialize in helping Australians find the best mortgage deals. Whether you’re looking to refinance or negotiate with your current lender, our team of experts is here to guide you every step of the way. Don’t let the RBA’s decisions dictate your mortgage rate—take control and explore your options today.
Contact us at 1300 952 286 or email us at info@boanco.com.au. Visit our website at www.boanco.com.au to learn more about how we can help you save on your mortgage.