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Record number of Aussies refinance loans

Borrowers should look at refinancing their loans to get a better deal as interest rates rise.

Borrowers should look at refinancing their loans to get a better deal as interest rates rise. Photo: TND

Spooked by repeated interest rate rises, Australian home owners are refinancing in record numbers.

Fourteen billion dollars worth of home loans were placed with a new lender in Australia in August alone, according to Australian Bureau of Statistics data.

That’s an increase of 13 per cent on July and 20 per cent on August 2021. A record 27,667 mortgagors were involved compared to the 23,642 who swapped lenders in the same month a year ago.

Borrowers with a standard $500,000 mortgage are meanwhile facing a cumulative $735 monthly hit to their family budget as a result of the six rate rises announced by the Reserve Bank of Australia since May 3.

The increases – four at 0.50 per cent and two at 0.25 per cent – have taken the official cash rate to 2.60 per cent per annum.

That means forking out an additional $8820 in repayments per year.

The rapid pace of the increases have led to considerable pressure for existing borrowers, says Graham Cooke, consumer research head at price comparison tracker Finder.

“They are scrambling to cut costs on their mortgage where they can,” he said.

“Repayment spikes are just too much to manage for millions of households causing a rush to refinance.”

Finder’s consumer sentiment analyser reveals one in four borrowers have struggled to meet loan repayments in the past three months.

Many took on too much debt when home loan rates were low and are now looking at how they can belt tighten, Mr Cooke said.

“Refinancing to a better deal can dramatically lower your costs and increase your savings.

“With at least one more rate rise predicted in the short term, the full impact of increasing rates is not expected to be felt until early next year.”

While inflated grocery and petrol bills are exacting a toll, a survey conducted by online broker Savvy shows 77 per cent of Australian mortgage holders have experienced some form of rate rise.

More than half have seen repayments jump up as much as five per cent and almost one in five, by up to 10 per cent.

As for corresponding pay increases, 34 per cent of the more than 1000 people surveyed said their wage packet hadn’t changed since 2021. About a quarter reported a rise of up to five per cent and seven per cent said it had gone up six-10 per cent.

Mr Cooke said there were some simple steps to cutting back.

“Loyalty doesn’t pay – shop around for the best deals on all your expenses.

“It’s also a good idea to start a budget … Knowing where your money is coming from and where it’s going is a critical step in getting on top of your finances.”

– AAP

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