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Get the best deal on your mortgage after a year of interest rate hikes

Some savings accounts now top inflation, but not at the major banks.

Some savings accounts now top inflation, but not at the major banks. Photo: TND

There has been no shortage of pain for Australian home owners this year as the fastest interest rate hikes in decades and falling property prices continue to squeeze mortgage holders.

RateCity figures show most lenders have passed on all of the Reserve Bank rate hikes issued between May and December, with the average variable rate across the big four banks now at 4.9 per cent – up from 2.24 per cent in February.

RateCity research director Sally Tindall says home owners who haven’t changed rates since the RBA began its rate hikes could still save thousands by refinancing.

Owner occupiers who switch from the average market rate of 5.86 per cent to under 4.5 per cent – the lowest rates – could save $5948 on a $500,000 loan in a year, RateCity data states.

“The average owner-occupier on a variable rate who hasn’t negotiated their home loan since the RBA began rate hikes is looking at an average rate of 5.86 per cent,” Ms Tindall said.

“It has gone up three percentage points in eight months – that’s a huge rise … people are paying a significantly higher rate than they’re used to.

“But the lowest variable rate of all the lenders who’ve announced their December RBA changes is 4.4 per cent – there’s a huge difference between the [average] and the lowest rates.”

Heading into 2023

A handful of lenders are offering variable rates below 4.5 per cent – including Bank First, Auswide Bank and Bendigo Bank.

A few other lenders are sitting just above that, with Pacific Mortgage Group at 4.54 per cent and Bank of Sydney offering 4.54 per cent.

Ms Tindall said these rates are attractive but also aren’t for all borrowers, with some conditions – like needing to have a strong equity in your property – before being eligible.

“They’re not for everyone,” Ms Tindall said. “They might have a requirement to have at least 40 per cent equity in your home.

“It’s incredibly stringent for a new borrower, but for someone who has had their home loan for a while and has a good track record of paying down their debt they might be eligible.”

Ms Tindall said a big change over the past eight months is that the market-leading rates are increasingly being offered by small banks, rather than non-bank lenders.

“It’s because deposits have become a very important part of the wholesale funding mix,” she said.

Fierce competition among big four

There’s currently tough competition to attract refinancers among the big four banks – Commonwealth Bank, ANZ, Westpac and National Australia Bank.

The Commonwealth Bank is offering the lowest ongoing variable rate at 4.84 per cent. Westpac has a lower rate of 4.64 per cent as an introductory offer for two years, which then reverts to 5.04 per cent.

Ms Tindall said introductory rates can be good for borrowers who refinance regularly, because they won’t necessarily get stung when their loan reverts to higher payments.

But she said the Commonwealth Bank is offering its lowest rate with an offset account, which is a bonus that some borrowers might be able to take advantage of to save even more.

Each of the big four banks is also offering a cashback deal to refinancers, which we’ve explored previously.

Either way, Ms Tindall said existing customers of major banks likely aren’t getting their best rate.

“If you’re an existing, loyal CBA customer it’s unlikely you’re on that [4.84 per cent] rate,” she said.

“The rolling stone gathers no moss in this case. You’ve got to keep moving your rate.”

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