Borrowers paid $6k more in interest last year

New research from RateCity.com.au revealed that homeowners who didn’t refinance their home loans over the past 12 months paid an average of $6,000 more in interest.

This extra cost comes even as the Reserve Bank of Australia (RBA) has held rates steady in recent months.

For a typical borrower with a $500,000 loan, the estimated interest paid between December 2023 and November 2024 totaled $35,308 – assuming no rate renegotiation. However, refinancing a year ago could have reduced that interest to $29,708, saving $5,600.

Estimated interest paid: last 12 months

Based on an owner-occupier with a $500K loan at December 2023 with 25 years remaining

Source: RateCity.com.au. Assumes borrower is paying principal and interest  with 25 years remaining on the average variable owner-occupier rate, which was 2.86 per cent at the start of the hikes.

Rate cuts unlikely before 2025

All major banks, including Westpac, NAB, and ANZ, predict RBA will hold the cash rate steady at its December meeting. While CBA forecasts the first rate cut in February, the majority expect a 0.25 percentage point cut in May next year.

With rates expected to remain on hold for the next several months, experts emphasize the importance of seeking individual rate relief through refinancing or negotiating with lenders.

Current big four bank cash rate forecasts

Refinancing now could save up to $10,000

According to RateCity.com.au, there are around 40 lenders offering variable rates below 6%.

A borrower who switches to a rate of 5.99% could save nearly $10,000 in interest over the next two years, even after accounting for typical switching costs of $1,250.

For borrowers with larger loans in cities like Sydney and Melbourne, potential savings could be closer to $20,000.

Give yourself the gift of a rate cut – RateCity

Laine Gordon (pictured above), RateCity.com.au’s money editor, urged borrowers to take action.

“Plenty of borrowers would have liked a little treat in the form of a rate cut for Christmas, but they’ll need to gift it to themselves,” Gordon said.

She added that the summer break is a perfect opportunity to get finances in order and reduce ongoing expenses.

“On average, borrowers forked out $6,000 in extra interest last year because they hadn't gotten around to switching. That money is better off in your pocket,” Gordon said.

He stressed the simplicity of switching, with many lenders now offering quick online applications.

“Switching banks on your holiday might seem as appealing as sticking pins in your eyes, but with many lenders now offering applications in less than an hour, it should leave you time to apply and still get to the beach,” Gordon said.

Lowest variable home loans on the RateCity.com.au database

Source: RateCity.com.au. Note: rates are for owner-occupiers paying principal and interest. Deposit requirements apply, excludes green loans, lowest variable excludes introductory rates. *First home buyers only.

Act now for financial relief

Borrowers who haven’t reviewed their home loan rates recently should prioritise refinancing to reduce interest costs. With lenders competing to attract new business and offering rates below 6%, a simple switch could deliver substantial long-term savings.

Potential savings from refinancing the home loan over summer

Based on an owner-occupier switching from 7.11% to 5.99% 

Source: RateCity.com.au. Note: based on an owner-occupier paying principal and interest with 25 years remaining. Assumes rates move in line with CBA’s cash rate forecast.

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