Why you should check your home loan now
Record levels of refinancing and fixed mortgage rates heading towards just 2 per cent are key COVID-19 changes shaking up Australians' home loans.
Throw in new government stimulus for new homes and renovations, record low variable rates and repayment deferrals by banks, and it makes now a perfect time for a mortgage check.
The latest Bureau of Statistics data shows home loan refinancing in April surged to $7.9 billion, up 50 per cent in a year and described by CommSec chief economist Craig James as "going gangbusters".
"Home buyers have taken advantage of super-low rates to shore up their finances," he said.
Mortgage Choice CEO Susan Mitchell said refinancing remained stronger than average in May and represented the majority of approved loans.
"The reasons for refinancing vary, but for the most part borrowers are chasing a better deal," she said.
"We have also seen many borrowers refinance their loans to restructure, access equity or top-up in order to fund renovations."
Mortgage Choice data shows demand for fixed rate loans has been steadily rising and last month reached 32 per cent of all mortgages.
"We haven't seen this level of demand for fixed interest rates since the GFC," Ms Mitchell said.
"The Reserve Bank of Australia's official cash rate is almost as low as it can go and with fixed rates as low as 2.09 per cent, it might be a good time to fix at least part of your home loan interest rate."
The cost of refinancing to a lower-interest fixed rate loan may offset break costs, but understand that variable loans still offer the most flexibility.
"If you haven't sat down and reviewed your home loan in the last two years, I'd urge you to do so immediately because chances are you might be paying too much," Ms Mitchell said.
"Don't be shy - call your broker or lender as soon as possible and ask if you can get a better deal. If your current lender isn't willing to lower your rate, there may be another out there who will."
Aussie CEO James Symond said in the past year major banks had reduced three-year fixed rates by 100 basis points, or 1 per cent, for owner-occupiers.
"Many of the lowest advertised interest rates currently on the market for owner-occupiers are fixed rates," he said.
However, deciding whether to fix should depend on borrowers' individual circumstances, Mr Symond said.
"Our recent research study shows almost 70 per cent of Australian mortgage holders believe now is a good time to refinance their home loan and get a better deal," he said.
Mr Symond said the end of financial year was a good time for people to take stock of their home loan and other finances, and should find out about available government incentives.
This month's announcement of the HomeBuilder program, offering $25,000 grants for some new home builds and renovations, is one example of new help available.
Originally published as Why you should check your home loan now