The Reserve Bank’s 10th interest rates hike in a row last week has sparked a flurry of fresh activity from lenders, which have been quick to pass on higher mortgage bills to Australians.
All four of the major banks have lifted interest rates for new and existing customers, adding about $74 to monthly repayments on a $500,000, 25-year loan, according to RateCity figures.
That takes the total increase in monthly mortgage bills since the RBA began hiking in May to almost $1000 – with some market interest rates for existing customers passing 8 per cent.
But there are ways to ease the squeeze, according to RateCity research director Sally Tindall, who says cut-throat competition between banks is continuing in early 2023.
Ms Tindall told The New Daily that a home owner who hasn’t refinanced in the past 12 months could be paying greater than a percentage point more on their loan than the lowest rates available.
Refinancing won’t eliminate the entirety of the RBA’s rate hikes, but it could take your bills back to the level they were at last September, before the past four increases, Ms Tindall explained.
“If you’ve got a good track record paying down your debt and you’ve got a decent amount of equity up your sleeve, you are very much in the driver’s seat,” Ms Tindall said.
“People don’t have to take these rate hikes lying down; they can do something about it by picking up their loan and walking down the street to a lender that’s going to offer them a more competitive deal.”
There’s also good news for savers in the RBA’s rate hikes, with account rates at the major banks also increasing over the past week.
Refinancing landscape shifts
Even amid record-breaking rate rises, there are still about 10 lenders offering interest rates to new customers around 5 per cent, which is far below the 6.36 per cent average being paid by those who haven’t refinanced in the past year.
It’s no wonder then that refinancing activity remains near record levels, with about $19 billion worth of loans changing over in January alone.
Ms Tindall explained that banks are scrambling to find refinancers amid a sharp decline in new mortgage financing over the past year.
“There are winners and losers in terms of the banks and the banks don’t want to be losers in terms of refinancing,” she said.
Savings rates improve
Under renewed pressure from governments and regulators to pass on rate hikes to savers, the major banks have made moves this week to lift returns for their account holders.
However, not every savings account at the big banks has gone up by 0.25 percentage points.
Commonwealth Bank, for instance, has raised the rate on its NetBank and YouthSaver accounts by 0.25 percentage points, but increased its Goal Saver by 0.15 percentage points this week.
ANZ, meanwhile, left the savings rate on two of its accounts unchanged and only increased its ANZ Plus Save account by 0.25 percentage points.
ING Bank continues to maintain the highest ongoing savings rate for all adults in the market, having increased its Savings Maximiser by 0.20 percentage points to 5 per cent on Friday afternoon.
Bank of Queensland’s Future Saver is the highest ongoing rate for those aged 14 to 35 with balances up to $50,000 at 5.15 per cent.
