Leading financial expert Mark Bouris says millions of Australian mortgage holders are missing out on huge savings by not doing one simple thing.
A leading financial expert is urging mortgage holders to refinance their home loans to save thousands of dollars in interest as the Reserve Bank of Australia (RBA) plans to raise cash interest rates for the third time this year.
Australians are bracing for key interest rates above 1 percent ahead of the RBA’s board meeting on Tuesday.
It will be the third rise in as many months after the RBA raised rates by 50 basis points to 0.85 percent in June, 35 days after they first hiked from a record low of 0.1 percent in May.
Economists are also forecasting further gains, with key interest rates likely to be above 2 percent by the end of the year.
It’s time to check your interest rate
Yellow Brick Road executive chairman Mark Bouris says mortgage holders who don’t monitor their interest rates will feel the pinch as rates rise.
“There is a huge swarm of Australians who never bother to check their interest rate,” said Mr Bouris.
“They don’t know if they’re paying too much and they never actually refinance, so they end up paying way too much.”
Stream more financial news live and on demand with Flash. 25+ news channels in 1 place. New to Flash? Try 1 month free. Offer ends on October 31, 2022 >
Not only can floating rate mortgage holders save thousands of dollars by getting “on top” of their finances, but also those taking out their fixed rate term can benefit if interest rates rise.
Take a mortgagee who took out a $500,000 loan for 30 years five years ago, with an interest rate of 3.35 percent and monthly repayments of $2463.07.
According to Yellow Brick Road calculations, they could save up to $28,000 in interest if they refinance today at a rate of 2.48 percent, saving $490.06 per month.
“You can’t sit back and complain about rate hikes if you can effectively save four rate hikes by refinancing,” said Mr Bouris.
Comparing Australia to America, where mortgage holders there regularly fund, Mr Bouris says Australians should stop feeling “comfortable” and instead recommends borrowers refinance quarterly.
“You should go the extra mile and have a mortgage broker that you visit every month,” said Mr Bouris.
“And if you have a good mortgage broker, they should contact you… In other words, the broker does the work for you.”
Be careful with cashback deals
A selling point to entice mortgage holders to refinance are cash back deals, where banks and lenders can reward borrowers up to $4,000 for changing their lender.
However, Mr Bouris cautions that sometimes cashbacks can do more harm than good if you don’t understand what you’re signing up for.
“I would be wary of money grabs as you will never outsmart a lender and they will always somehow get it back if not now, over time,” said Mr Bouris.
“I would look for the highest interest rate that gives me the same amount I currently owe.”