Millions of mortgages still paying too much as RBA dashes hopes of rate relief

Australians are stuck with decade-high interest rates over Christmas after the RBA held firm again this week, dashing hopes of mortgage relief in 2024.

But while banks won’t be reducing monthly repayments based on central bank decisions any time soon, there are other ways to take advantage of competition among lenders to lower your rate.

Fresh Canstar analysis shows just under a million mortgages have been refinanced since rate hikes started in May 2022, including some home owners who “refinanced more than once”.

That’s still a small slice of the more than five million mortgages estimated to be on the books of the big four banks alone, meaning many families are potentially missing out on substantial savings.

“Last month alone, 17 lenders made cuts to at least one of their variable rates,” Canstar research insights director Sally Tindall said.

“What this tells us is that competitive pressure, which is being driven by customers refinancing, is pushing rates down.

“If you haven’t refinanced your loan since the start of the hikes, run the numbers and call a couple of lenders to see if it’s a viable option.”

Australians who have not refinanced their loan since hikes began could reduce their monthly repayments by hundreds of dollars by moving onto even an average interest rate.

And many could do even better, particularly if you’ve been keeping up with your repayments and have built up significantly more equity over the past two years.

An owner-occupier who hasn’t renegotiated since 2022 is “likely” to be on a rate about 7.11 per cent, Canstar said, based on the RBA’s average variable rate for those home owners in 2022 plus 4.25 percentage points worth of hikes since then.

That’s much higher than the 6 per cent rate now being offered by 34 lenders.

“The catch is, these rates are often reserved for new customers rather than existing ones,” Canstar said.

RateCity figures show home owners could save more than $400 a month on repayments if they haven’t refinanced since 2022.

Those savings equate to $12,315 over two years if a home owner refinanced to “one of the lowest variable rates on the market”.

RateCity money editor Laine Gordon said that’s a “timely reminder” to  check your home loan rate.

“If you are being taken for a ride, then now is the time to do something about it,” Gordon said.

“By all means haggle, but consider making the switch. The sharpest rates are typically reserved for new customers, no matter how good your negotiating skills are, so it’s worth considering refinancing.

“If you are thinking of switching lenders, firstly do a quick check of how much equity you have in your loan because this is often crucial in understanding your options.”

It will still be months before economists expect the RBA will deliver mortgage relief from the top down, with concerns about stubborn services inflation set to delay any cut until early 2025.

Major bank economists are now forecasting February for the first RBA interest rate cut, though other experts think central bankers might wait until May or even June.