The mortgage war that has been taking place in Australia over the past few years is now coming to an end, and for those who are still considering switching mortgages to save money, it is important not to delay any longer. Amid talk of borrowers being stuck in a mortgage prison, there has actually been fierce competition among lenders for mortgage business. However, this battle is now drawing to a close.
During the pandemic, the real estate market experienced significant fluctuations. Business dried up when buyers vanished, only to surge again when out-of-town or interstate borrowers returned to the market in search of a new lifestyle. Even with the recent rise in official interest rates, many borrowers have been switching to new home loans.
Lenders have been offering various incentives to attract borrowers, such as waiving application fees, offering cashbacks, and providing sizable interest rate discounts. However, the landscape is changing, and it is important to act quickly. Around $289 billion worth of loans have been refinanced since interest rates began rising in May 2022, as borrowers sought repayment relief. In July alone, borrowers moved away from their lenders to the tune of $21.5 billion, surpassing the previous high of just over $21 billion set in March.
Cashback deals from Westpac and NAB, which were popular among customers, came to an end in June. To take advantage of these deals, applicants had to submit their forms by June 30, and many accepted the offers in July. The record refinancing figures may also be due, in part, to hundreds of thousands of borrowers coming off their fixed rates.
With interest rates having risen since May 2022, adding an average of $1,381 to the now-$593,475 loan, the only way for anyone to save money is to reduce the starting rate. However, lenders are now increasing rates for new customers as it appears that we are at or near the peak of the interest rate cycle.
Rachel Wastell, spokesperson for datahouse Mozo, believes that lenders are looking to rebuild net interest margins before rates start to come down again. She warns that the strong competition and big discounting seen in the market over the past 18 months are likely coming to an end as interest rates on home loans rise and cashback offers decrease.
Despite the closing window of opportunity, there is still time to take advantage of potential interest savings. While the Reserve Bank’s discounted rate is 7.06%, the best-in-market rate is 5.69%. For an average loan of $593,475, this translates to a monthly saving of $505, a yearly saving of $6,062, and a total savings of $151,560 over the course of a 25-year loan term.
It is crucial to act swiftly and explore your options if you are considering switching mortgages to save money. Various lenders are offering market-beating rates, so it is worth comparing your options. However, keep in mind that these rates are subject to change and may not be available by the time you decide to switch.
In conclusion, the mortgage war in Australia is wrapping up, and borrowers who are still considering switching mortgages to save money should do so without delay. The opportunity for substantial savings is closing, but it is not too late to take advantage of competitive rates. Act now and compare your options to secure a better mortgage deal.