Homeowners rush to refinance as RBA warns of more rate rises

Reserve Bank of Australia governor Philip Lowe has repeatedly signalled more rate rises are on their way as the central bank tries to get inflation back under control.

His latest warning came at an American Chamber of Commerce In Australia speech, where Dr Lowe said that the central bank was prepared to do whatever was necessary to bring down core inflation to its target range of between 2-3% (it's currently at 3.7%).

“Higher interest rates have a role to play here, by helping ensure that spending grows broadly in line with the economy's capacity to produce goods and services,” he said.

The RBA lifted the country’s official interest rate following its two most recent monetary policy meetings in May and June, taking the cash rate to 0.85% from its historic low of 0.10%.  

Those two increases alone have added nearly $200 to the monthly repayments on a $500,000 variable-rate mortgage with 25 years left to go, according to RateCity calculations.

Unsurprisingly, some homeowners aren’t taking those increases lying down and are refinancing onto a better deal to relieve the pressure on their monthly budgets.

Refinancing booms as lenders compete hard for your business

New data from property settlement platform PEXA shows a substantial lift in refinancing volumes over May, as homeowners rushed to get ahead of rate rises.

Refinance settlements surged across:

• Victoria = +26.7% month-on-month

• Western Australia = +25.0%

• Queensland = +21.8%

• New South Wales = +20.8%

Fuelling the spike in refinancing is the intense competition between lenders, which has seen some offer substantial discounts on their variable-rate products.

Take a recent client, who came to see Eventus Financial before the RBA started lifting rates in May.

We helped this client get their variable rate slashed from 3.24% to 1.94% – a reduction of 1.23 percentage points. As a result, they are still better off, even though rates have risen by 0.75 percentage points in the meantime (their current rate is 2.69%).

In fact, they’d still have more money in their pockets if the cash rate goes up by another 0.50 percentage points – as this would take their rate to 3.19%.

Want to soften the blow of future rate rises?

As one of the best brokers in Sydney, Eventus Financial has strong bargaining power with the banks, so we can help you get a lower interest rate by refinancing your loan.  

Schedule a no-obligation consultation with Alex to find out how we can help you with your home loan.