When was the last time you reviewed your mortgage? If you haven’t or it’s been a while, there’s a likely chance that you’re paying much more than you need to.
Following the widespread impact of COVID-19, the subsequent changes to the economy and housing market have meant that there has never been a better time to look for a loan. But if you’re not looking to buy a new property and have an existing mortgage, can you still reap financial rewards? The answer is, yes.
Below are some key reasons why now is a great time is to review your mortgage:
Current Low-Interest Rates
Following the Reserve Bank’s reduction of interest rates, many banks and second-tier lenders have followed suit by reducing the level of interest on fixed-rate mortgages. If you’re currently under a fixed rate contract that isn’t competitive, it might be worth the early exit fees to secure a much better rate. With some lenders offering under 2% for fixed-rate contracts and just over 2% for variable rates, there is no better time to take advantage of these rates.
A Great Time to Shorten Terms
The RBA’s decision to open the term funding facility (TFF) has allowed banks to borrow billions of dollars at the cash rate, which has been approximately 0.1% since November of 2020. As this fund was what allowed banks to provide such low fixed rates during COVID-19 lockdowns, its cessation on June 30 of this year means that these lower fixed rates aren’t here to stay.
These general reductions in interest can’t be talked about in a vacuum, without discussing that it’s also a great time to shorten the length of your loan, if your goals are to be a mortgage-free household. Taking advantage of low-interest rates now is the perfect way to eliminate as much of your debt as possible, considering it will vastly reduce costs.
Looming Economic Recovery
Following the recession, economic recovery is looming and improvements to job stability and an increase in GDP means that inflation is predicted to increase significantly. While this news will be great for those with a lot of money invested in savings and share portfolios, it signifies bad news for those who are currently coasting on low variable rates. By reviewing your mortgage now, you can take full advantage of competitive rates before the return to values to 3-4.5%.
In fact, recent evidence states at least 25 out of 99 lenders have hiked up interest rates on fixed home loans in response to economic upturn. Furthermore, lenders are also adjusting interest increases varying between 10 to 30 basis points on 3-year, 4-year and 5-year fixed rates, depending on the provider.
With economic improvement a necessity, it’s also important to consider the return to the tradition of variable rates being the cheaper mortgage option, so capitalising on low interest, short term fixed-rate loans would be advantageous.
The Royal Commission investigation into misconduct in the banking, superannuation and financial services industry has uncovered a range of malpractice and unethical fees and charges to Australian consumers. In response, banks have been forced to become more competitive, provide more information and offer better deals in general. By taking advantage of the expectation of large institutions and second-tier lenders to offer better rates, you can benefit from large reductions in fees on your mortgage and any other loans you may have.
Refinancing Saves You More than Just Money
If you’re looking to cut costs, refinancing can also save you a lot of money. It’s estimated that on average, Australians save over $2,600 per annum in refinancing their mortgage, which can add up year after year. This, however, is just the average figure, depending on your loan size, you might have the potential to save even more on your mortgage. Remember, the attractive offers of fixed rates will end. So, to ensure you don’t pay more than you need to, consider refinancing now.
Beyond this, the option to refinance also helps with adjusting well to changes in your personal life, such as the event of having a baby, changing jobs or getting a promotion at work. In these instances, it’s important to work with a lender who is going to understand your lifestyle, your goals and be able to offer you with options that are best suited to your professional and personal needs.
If you’ve got any questions about reviewing your mortgage, refinancing or services we provide, contact our team at Morrows today.
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