Since the onset of the COVID-19 pandemic, home loan interest rates have hit historic lows in Australia. This is good news for aspiring and existing homeowners, because even a 0.5% difference in your interest rate can save you thousands over your home loan term.
However, some banks have already increased rates on their home loan products, and economists have predicted interest rates will rise further in 2023 when the Reserve Bank of Australia (RBA) hikes the official cash rate.
So, if you’re a homeowner and you haven’t reviewed your interest rate in a while, or you’re someone who plans to purchase a house soon, it’s important to stay on top of interest rates. Keep reading to find out how you can make sure you have the lowest interest rate on your home loan in 2022.
A good way to make sure you have a low interest rate is to search and compare the interest rates on offer by lenders. Interest rates can fluctuate regularly, so it’s worth observing them to keep on top of current rates.
If you check what interest rates are available on the market every now and then, you’ll be able to see when you could potentially save money by switching to a lower rate.
Make sure you always have best home loan deal.
Before you apply for a home loan with a low interest rate or refinance to save on interest, it’s important that you review your financial situation to ensure that you’ll be eligible for low rates. Lenders are more likely to offer lower interest rates to borrowers who they consider to be of low risk of defaulting on home loan repayments.
To lower your risk and increase your chances of obtaining a low interest rate, there are a few things you can do:
A guide to deposits, pre-approval, & choosing the right property.
If you’re a homeowner who’s been with the same lender for a while, chances are you’re paying a loyalty tax – that is, you’re being charged a higher interest rate than new customers. It’s worth checking to see how your interest rate compares to the rate your lender is offering to new borrowers.
If you find out you are paying more in interest, it’s worth negotiating with your lender to lower your rate. Chances are if you’re a reliable customer and you can show proof of lower rates on the market, your lender will be more inclined to decrease your interest rate.
If you’ve tried negotiating with your lender and you don’t have any luck, be prepared to look around elsewhere for a better deal. Considering economists have predicted interest rates will be on the rise sooner in 2022 than initially thought, it might be time to refinance and lock in a lower rate with another lender.
Fixed rate home loans can be a good option if you want to protect yourself from interest rate hikes. You can choose fixed terms between one and five years, meaning your interest rate will stay the same during this time, and you won’t have to worry about fluctuations in rates. However, fixed interest rates offer less flexibility than variable interest rates, so it’s important to take this into account.
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While getting a low interest rate on your home loan is important, it’s not the only cost or feature to consider. Other fees and charges like establishment fees, Lenders Mortgage Insurance (LMI), plus offset account or redraw facility fees are just some of the other costs to take into account when assessing if a home loan is right for you.
You should also be mindful of weighing up all of a home loan’s features, not just its interest rate. Consider questions like these:
Asking yourself these questions will help you look at a home loan in its entirety.
It’s smart to regularly check if you’re still on a competitive home loan interest rate. The easiest way to stay on top of fluctuating rates is to use an online comparison tool – you don’t even have to leave your couch. Lendi makes searching and comparing interest rates online simple. If you’re refinancing or on the hunt for a home and you need a hand, you can book an appointment with one of our Home Loan Specialists who can make sure you get a low rate.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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