Best new refinancing deals for November 2020

Best new refinancing deals for November 2020

With the Reserve Bank of Australia (RBA) cutting the cash rate to a new record low of 0.10 per cent, home loan borrowers have never had more ammunition when it comes to refinancing.

The RBA cash rate is currently sitting at an historic low, with only 10 basis points separating it from zero. In such a low-rate environment, borrowers with banks not passing on rate cuts may be wondering if now is the time to consider refinancing.

There are a range of benefits to refinancing, including

  • Switching to a lower interest rate;
  • Switching to pay less fees;
  • Switching to gain features, like an offset account or redraw facility; and
  • Switching to free up some equity.

In this environment when your lender and others are likely offering more competitive rates to new customers, and not always passing them on to existing customers, the onus is on the borrower to seek them out.

Firstly, contact your lending by picking up your phone or hopping online. Ask them for a rate cut. Look on their website to see what rates they’re offering new customers and, if you are paying more, ask them to match this. You have nothing to lose and everything to gain just by asking.

If your lender refuses, hop online and look at some more competitive options. There are a range of home loans now offering interest rates starting with a 1. You may want to create a short list of new loan options and threaten your lender with switching to one of these. If they still don’t budge, you’ve now got a short list of new options to refinance to.

Competitive refinancing home loans for November

Here are some of the lowest interest rates available to refinancers for November. Keep in mind that due to the cash rate cut, some new rate home loan commencement dates may be in the future.

A lot of the lowest refinancing rates come with lower LVRs (70 per cent or less). Refinancers have an advantage here over new customers, as years of paying down equity makes meeting these LVR requirements a little easier than saving up a 30 to 40 per cent deposit on a home.

Lowest owner-occupier variable home loans (P&I)

Home loan Rate Max LVR
Reduce Home Loans Rate Cutter Home Loan

1.77%

60

Homestar Finance Star Gold Home Loan

1.79%

60

Pacific Mortgage Group Standard Variable Home Loan

1.89%

60

Freedom Lend Freedom Variable Home Loan

1.97%

70

Homeloans.com.au Low Rate Home Loan - Prime

2.14%

60

Source: RateCity.com.au. Data accurate as of 09/11/2020.

Lowest owner-occupier fixed home loans (P&I)

Home loan Rate Fix Term Months Effective from
HSBC Fixed Rate Home Loan

1.88%

24

19-Nov

Westpac Premier Package Fixed Options Home Loan

1.89%

48

 
St.George Advantage Package Fixed Rate Home Loan

1.89%

48

 
Suncorp Bank Home Package Plus Personal Fixed Special

1.89%

24

19-Nov

Reduce Home Loans Rate Crusher

1.90%

12

 

Source: RateCity.com.au. Data accurate as of 09/11/2020.

Lowest investor variable home loans (P&I)

Home loan Rate Max LVR
Homeloans.com.au Low Rate Home Loan - Prime

2.29%

60

Homestar Finance Variable Rate Investment Loan

2.34%

70

Pacific Mortgage Group Standard Variable Investment Loan

2.49%

75

Athena Home Loans Investor Accelerates

2.54%

60

Resimac Prime Investment Loan

2.54%

70

Source: RateCity.com.au. Data accurate as of 09/11/2020.

I deferred my mortgage. Can I still refinance?

For the same reason that the RBA was encouraged to cut the cash rate, not every Australian will be in the best position to refinance. If the economic impacts of the Covid-19 pandemic means you’ve lost your job or deferred your mortgage, you may not be able to refinance right now.

You may instead need to consider sticking with a higher variable rate or fixing on a lower rate for a set period of time. Switching lenders may not be available for you, but once you get back to making regular repayments and paying down the equity in your home, you’ll gain back your bargaining power. This means you may be in a better position to refinance in the future.

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about home loans

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What is a comparison rate?

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender.