In recent months, there has been a surge in refinancing activity as borrowers seek to switch lenders in response to the rise in interest rates, according to the latest findings from the Australian Bureau of Statistics (ABS).
Despite a slight decrease of 3.1% compared to the previous month, owner-occupiers and investors successfully refinanced a combined total of $20.2 billion worth of loans with external lenders in June. This amount reflects a significant 12.6% increase from the same period last year. Notably, these past 14 months have witnessed the highest levels of refinancing activity in history.
The Advantages of Refinancing in a Rising Interest Rate Environment
As interest rate hikes continue to impact households across the nation, refinancing has emerged as a smart strategy for many borrowers. By taking a closer look at your existing loan and financial situation, there is potential to explore the market and present options that may result in considerable savings.
1. Lower Interest Rates
Refinancing offers borrowers the opportunity to secure a lower interest rate. With interest rates on the rise, switching to a different lender can enable borrowers to benefit from more favourable rates. Even a slight reduction can result in substantial savings over the life of the loan.
2. Debt Consolidation
Refinancing allows borrowers to consolidate multiple loans, such as credit card debts or personal loans, into their mortgages. This debt consolidation streamlines repayments, potentially reducing overall monthly payments and simplifying financial management.
3. Unlocking Home Equity
Homeowners who choose to refinance can tap into their property’s equity. As property values increase over time, this equity can serve as a valuable resource for funding renovations, investments, or other financial needs. By leveraging this asset, borrowers can access additional capital without incurring additional debt.
The Importance of Considering Costs and Seeking Professional Advice
While refinancing presents numerous advantages, it is crucial to evaluate the costs and benefits before making a decision. Switching lenders may involve fees and charges that should be considered alongside the potential long-term savings from securing a lower interest rate or consolidating debt. Seeking professional advice is essential to fully comprehend the terms and conditions of any new loan and to make an informed decision that aligns with your financial goals.
If you are considering refinancing, Peel Finance Brokers can provide the expert guidance you need. Our experienced team of brokers will carefully assess your current loan and financial situation, taking into account your long-term goals and objectives. We will then conduct thorough market research to present you with a range of suitable refinancing options tailored to your specific needs. Contact us today for personalised, expert advice on your refinancing options.
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Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.