January 12, 2017
“The new year is the ideal time for Australians to review their mortgage and make sure they are still in the best product for their needs,” Mortgage Choice chief executive officer John Flavell said.
“Whether you've been in your current home loan for several months or several years, it is important to give your home loan a health check at the start of every new year.
“At present, home loan interest rates continue to hover around all-time lows. That said, over the last couple of months many of Australia's lenders have lifted the interest rates across their suite of home loan products.”
Moving forward, Mr Flavell said further rate hikes were now more likely than not.
“Over the last couple of months, we have seen the United States' Central Bank lift the Federal Funds rate by 25 basis points. In addition, funding costs have started to rise, which could encourage the Reserve Bank of Australia and, in turn, Australia's lenders to lift rates,” he said.
“With this in mind, now really is the perfect time for borrowers to review their mortgage and make sure they are still in the right product for their needs.
“By reviewing their home loan, borrowers may find there is another product on the market that is better suited to their needs.”
Mr Flavell said borrowers had a wide variety of home loan options at their disposal, with lenders offering a range of competitive products.
“Depending on your needs, you may choose to select a fixed or variable rate home loan. Alternatively, you could choose a split rate mortgage – where part of your home loan is fixed and the other part is variable – thus providing you with the best of both worlds.”
According to Mr Flavell, there has been a significant increase in the proportion of borrowers opting for a fixed rate mortgage.
“Our latest national home loan approval data found fixed rate home loans accounted for 22.04% of all loans written in December, up from 19.51% in November,” he said.
“People are increasingly looking for certainty around their mortgage repayments and a fixed rate or split rate mortgage provides them with just that.”
In addition to potentially securing a better suited home loan, Mr Flavell said refinancing could potentially help borrowers secure a sharper rate and thus reduce their monthly mortgage repayments.
“A lower interest rate on your loan can help you to either pay off your mortgage faster or inject more money into your back pocket.
“Alternatively, you may choose to refinance in order to access the equity you have built up in your property and finance some home renovations.
“Finally, you may choose to refinance your home loan in order to consolidate any outstanding debts you may have, including credit card bills, personal loans or car loans.”
But while there are a number of benefits associated with refinancing, Mr Flavell said there is a number of factors all borrowers should consider before heading down this path.
“Refinancing can be an expensive process depending on the type of home loan you are currently in. As such, it is important to weigh up the costs associated with refinancing, including potential break fees, Lenders Mortgage Insurance and borrowing costs, and make sure it is the right financial move for your needs.
“Before making any decisions, make sure you speak to your local mortgage broker.”