Senior finance expert Mark Bouris says millions of Australian mortgage holders are missing out on big savings by not doing something simple.
Leading finance expert urges mortgage holders to refinance their home loans to save thousands of dollars in interest as the Reserve Bank of Australia (RBA) seeks to raise the cash rate for the third time this year .
Australians are preparing for basic interest rates above 1 per cent ahead of the RBA board meeting on Tuesday.
It will be the third rise in so many months, after the RBA raised rates by 50 basis points to 0.85 percent in June, 35 days after they rose for the first time in May from an all-time low of 0 , 1 percent.
Economists also predict further rises, with the base rate likely to hover above 2 percent by the end of the year.
It’s time to check your interest rate
Yellow Brick Road chief executive Mark Bouris says mortgage holders who don’t check their interest rates will feel the pinch as rates rise.
“There are a lot of Australians who never bother to check their interest rate,” Bouris said.
“They don’t know if they’re paying too much and they never refinance, so at the end of the day they’re paying too much.”
Variable rate mortgage holders can not only save thousands of dollars by putting themselves “at the forefront” of their finances, but also those who end up with a fixed rate term can benefit as interest rates rise. interest.
Take out a mortgage holder who, five years ago, took out a $ 500,000 loan for 30 years, with an interest rate of 3.35 percent and monthly repayments of $ 2,463.07.
According to Yellow Brick Road calculations, they can save up to $ 28,000 in interest if they were refinanced today at a rate of 2.48 percent, saving $ 490.06 a month.
“You can’t just sit back and complain about rate hikes, when you can effectively save 4 rate hikes by refinancing,” Bouris said.
Comparing Australia with America, where mortgage holders there regularly fund, Bouris says Australians should stop getting “comfortable” and recommends that borrowers refinance each quarter.
“You should go one step further and you should have a mortgage broker with whom you register every month,” Bouris said.
“And if you have a good mortgage broker, they should consult you … In other words, the broker does the work for you.”
Be wary of cash back offers
One selling point for attracting mortgage holders to refinance is cash repayment offers, where banks and lenders can grant borrowers up to $ 4,000 to change their loan provider.
However, Mr Bouris warns that sometimes refunds can do more harm than good if you don’t understand what you’re signing up for.
“I would be wary of cash withdrawals, as you will never be smarter with a lender and they will always get you back somehow, if not now, over time,” Bouris said.
“I would be looking for the highest rate that gives me the same amount of money I currently owe.”
Read related topics: Reserve Bank