KEY POINTS:
- Almost a quarter of all borrowers are paying 6.5 per cent or more on their variable-rate loans, new modelling suggests.
- There are 57 variable-rate loans available with rates under five per cent.
- Refinancing could save mortgage holders up to more than $1,000 a month.
Mortgage holders who have not refinanced could be missing out on hundreds of dollars in savings according to the financial comparison website Canstar.
Almost a quarter of all borrowers are paying 6.5 per cent or more on their variable rate loans, based on Canstar modelling, which is 1.81 per cent higher than the cheapest loan rate.
For these mortgage holders, failing to shop around for a better deal will add $570 or more each month to a standard $500,000 loan over 30 years.
Why did monthly repayments increase so much?
Since May last year, the Reserve Bank of Australia (RBA) has lifted the official cash rate by 3.5 percentage points from the record low level of 0.1 per cent in a bid to curb inflation, which has pushed up monthly repayments for mortgage holders.
Some mortgage holders are even paying interest rates upwards of 8 per cent.
For these borrowers, swapping to the lowest-price loan could lead to savings of more than $1,000 a month on a $500,000 loan over 30 years.
Canstar's finance expert Steve Mickenbecker said 57 variable rate loans were available with rates under 5 per cent.
"And while refinancing to the lowest rate loan in the market may not always be possible, there's still a wide range of loans offering big savings," Mr Mickenbecker said.
The benefits of refinancing
According to Mr Mickenbecker, refinancing is the easiest way to find household savings.
"Even for borrowers with rates in the mid-range of 6.01 per cent to 6.5 per cent, the savings are still a very substantial $471 per month.
"Try saving that on any other household bill."
The RBA's most recent statement in March included a wording change, from “further increases in rates” to “further tightening of monetary policy”, boosting expectations that a rate pause could be on the way.
A plateau in wage growth reported in new data from jobs site SEEK could also build the case for a pause sooner rather than later.
SEEK's advertised salary index, which measures the change in the advertised salaries on the platform's job postings over time, recorded a 0.3 per cent lift over the month, and 0.8 per cent growth over the quarter.
SEEK senior economist Matt Cowgill said average advertised salary growth was flattening out.
"The surge recorded in 2021 and early 2022 is behind us, but it's also showing no signs of returning to the lower pre-COVID levels," he said.
"The fact that advertised salary growth is not accelerating will reassure policymakers that we are not in a wage-price spiral," he added.
But with advertised salaries falling well behind inflation, Mr Cowgill said workers would be struggling to make ends meet.
