Let’s Talk: Refinancing your home loan

In 2020 and 2021, the onset of the Covid-19 pandemic saw the RBA set interest rates at a record low (as low as 0.1%). It was one of the causes of an unusual rise in the popularity of fixed-rate home loans in Australia.

Many Australian borrowers locked their rates for three years or less. Two-thirds of those borrowers will complete their fixed terms in 2023, based on an article by Aussie and CoreLogic. This includes Australian expats living in Singapore, so it’s important to get clued up on what will happen when your fixed term expires, and how it will impact you. 

For example, if your fixed-rate mortgage in Australia is expiring, some of the interest rates secured on fixed rates during the onset of the pandemic were as low as 1.95% for three years or less. 

If you locked in your rates between April and December 2021, your fixed term might finish between April and December 2023. When these fixed-rate mortgages expire, they will revert to the bank’s standard variable rate.

What to do as a borrower

Borrowers on variable rates may already be familiar with the increased interest rates in Australia. However, the sudden rise in interest rates may come as a shock for many Australian homeowners who are still paying low-interest rates for their homes.

Fixed-rate borrowers will find themselves paying three to four percent more than they are currently paying. Furthermore, the higher interest rate may negatively impact unprepared borrowers. If this is the case for you, it might be savvy to consider refinancing your fixed rates. As the current Australian homeownership landscape in 2023 looks at higher interest rates and rent costs, such increased rates may be a lot for some borrowers to adjust to financially.

Refinancing your home loan provides better control over your expiring rates by making changes to the current terms and interest rates that you’re paying. You can also take this opportunity to look elsewhere for the most competitive rates in Australia.

Although refinancing may help you to avoid being in a pinch, it may be better to wait until your fixed rate has expired before refinancing. For instance, a lender may charge you break costs for refinancing before your fixed term expires. We recommend that you consider every aspect of your home loan rather than solely focusing on interest rates, especially if you’re an expat. The best thing to do? Speak to a professional to understand what’s best for you. 

Contact Odin Mortgage today at odinmortgage.com