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Aussie borrowers are being smashed by the highest mortgage rates in 18 years – but one simple move could save them $3000 a year. That’s the message from veteran mortgage broker John Maxwell, who says many stressed homeowners are so focused on the Reserve Bank’s latest blow they’re missing a practical way to ease the pain: refinancing. With the cash rate now at 4.85 per cent – its highest level since 2008 after the RBA’s fifth hike of the year on Melbourne Cup day – mortgage pressure is intensifying fast.
And it’s about to get worse. MORE NEWS ‘War crime’: Diner blasts surging pub prices ‘Offensive’: Woman ordered to repaint red roof ‘Affluent clientele’: $29k cruise unveiled amid mortgage pain Macquarie was first to move after the decision, while Westpac, NAB, Commonwealth Bank and ANZ have all confirmed they will pass on the full increase to variable home loan customers, with changes due to take effect from Friday, November 13. For borrowers already cutting back on groceries, household spending and children’s activities, the extra cost is significant.
Rates are at their highest since the GFC, but stressed homeowners could be missing a simple $3,000 mortgage fix. On a $500,000 mortgage, the latest increase will add about $77 a month, taking the total increase after five hikes to around $380 a month. For someone with a $700,000 loan, the latest rise adds about $107 a month, bringing the total increase to roughly $532.
And on a $1 million mortgage, the latest hike will add about $153 a month, taking the total increase to around $759 a month. But Mr Maxwell says many borrowers don’t realise a relatively small rate cut can deliver meaningful savings. On a hypothetical $800,000 mortgage at 7 per cent over 30 years, trimming just half a percentage point off the rate would save about $266 a month, or more than $3000 a year.
Over the life of the loan, that’s close to $96,000. Source: News24 That annual saving is nearly half the extra amount an average borrower must now find each year after five rate hikes. “That’s the grocery bill, the kids’ sport, the sleep,” said Mr Maxwell, co-founder of The Mortgage Coach.
“I’m sitting across from people who are lying awake at night, and the only thing they’ve done is ring their own bank. “A lender can only offer you what’s on its own shelf, and the best rates often go to new customers, not loyal ones. “It’s easy to blame the RBA, and I get it.
But while they’re angry at the thing they can’t control, they’re often ignoring the thing they can. Don’t wear it on the chin.” Mr Maxwell said the issue wasn’t just the headline rate, with loan structure, features and fees also affecting how much borrowers end up paying. Source: Canstar “It’s about more than the rate: loan structure, features and fees can all change the picture.
And when it’s done properly, people feel the relief straight away, because they finally feel in control again,” he said. As of Wednesday, Mr Maxwell said some of the top rates in the market included Gateway Bank at 6.14 per cent, Teachers Mutual and Newcastle Permanent at 6.19 per cent, Macquarie and MyState Bank at 6.29 per cent, and ANZ and Zeus at 6.33 per cent. Canstar has also flagged Southern Cross Credit Union, which announced a 0.25 percentage point increase to its home loan rates from tomorrow.
If that increase applies across its full home loan range, it could still be among the lowest variable rates in the market at 6.18 per cent. Mr Maxwell urged mortgage holders not to assume they were trapped with their current bank. “Loyalty to your lender rarely pays in this day and age anymore,” he said.
“Don’t assume the big four are your only options. There are over 100 home lenders in Australia, each with a different appetite for your individual circumstances. “Don’t go it alone.
An independent review from a mortgage broker can show options you didn’t know you had.” He also said many borrowers didn’t understand a crucial part of how mortgages work in Australia, where interest is calculated daily. “Mortgage holders are forgetting a crucial trait about their mortgage in Australia. The interest is calculated daily using the compound interest effect.
Effectively, it’s the balance of the loan each day which makes a huge difference on where your mortgage will be sitting over the next 15 to 30 years,” he said. “You should learn how your mortgage behaves and more importantly how it should behave when it’s structured to minimise the lender’s interest calculation.”
Source: Real Estate
