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Australians with $500,000 loan can save $6,300 a year by switching from big bank to cheapest loan

Australians with an average $500,000 home loan can save $6,300 a year simply by ditching the big banks.

A record 33,712 borrowers refinanced their mortgage in May, a 30 per cent increase in just one month, a Finder analysis of Australian Bureau of Statistics data showed.

Almost two-thirds, or 64 per cent, of those refinancing were switching lender.

Finder’s insights manager Graham Cooke said the coronavirus crisis had inspired a record number of borrowers to change borrowers to slash their monthly repayments.

Australians with an average $500,000 home loan can save $6,300 a year simply by ditching the big banks. A record 33,712 borrowers (stock image) refinanced their mortgage in May, a 30 per cent increase in just one month, a Finder analysis of Australian Bureau of Statistics data showed

Australians with an average $500,000 home loan can save $6,300 a year simply by ditching the big banks. A record 33,712 borrowers (stock image) refinanced their mortgage in May, a 30 per cent increase in just one month, a Finder analysis of Australian Bureau of Statistics data showed

‘As budgets are stretched, a record number of people are deciding to get a better deal on their largest investment,’ he said.

‘While the value of houses may well drop in the next year, the mortgages on them will not.’

Australia’s big four banks offer average standard variable loans of 4.04 per cent, Finder calculated.

That is almost double Australia’s cheapest mortgage level of 2.09 per cent, which HSBC offers for two years as a fixed rate. 

A borrower servicing an average $494,462 mortgage can save $6,276 a year simply by switching from an average standard variable mortgage with a big bank to HSBC’s two-year fixed rate.

Tasmanian borrowers can save $6,564 by switching from an average big bank loan to a Bank of Us product, which has Australia’s cheapest rate of 1.99 per cent but only for those in the island state.

Finder's insights manager Graham Cooke said the coronavirus crisis had inspired a record number of borrowers to change borrowers to slash their monthly repayments. Australia's big four banks offer average standard variable loans of 4.04 per cent, Finder calculated. Someone  switching to HSBC's cheapest fixed rate of 2.09 per cent stood to save $6,276 a year with a $500,000 loan

Finder’s insights manager Graham Cooke said the coronavirus crisis had inspired a record number of borrowers to change borrowers to slash their monthly repayments. Australia’s big four banks offer average standard variable loans of 4.04 per cent, Finder calculated. Someone  switching to HSBC’s cheapest fixed rate of 2.09 per cent stood to save $6,276 a year with a $500,000 loan

National Australia Bank’s digital subsidiary UBank offers the cheapest one and three-year fixed rates of 2.14 per cent.

Australia’s cheapest home loans

Bank of Us: 1.99 per cent two and three-year fixed rates (only available to existing customers and Tasmanians)

HSBC: 2.09 per cent, two-year fixed

UBank: 2.14 per for fixed one and three years

Source: Canstar 

Switching from a NAB variable rate of 4.02 per cent to UBank would save more than $500 a month or $6,048 a year. 

Even a modest half a percentage point reduction in mortgage rates would save a borrower $36,287 over 30 years, Finder calculated.  

COVID-19 has discouraged housing market investors and forced the Reserve Bank of Australia to cut official interest rates to a record-low 0.25 per cent.

Mr Cooke said this meant owner-occupier home borrowers could get a better deal.

‘Historically low interest rates and a lack of investor spending are a double whammy to banks, but a boon for mortgage holders,’ he said.

The banks have a challenge getting new customers with the value of new loans plunging by 11.6 per cent in May even as COVID-19 shutdowns were eased, Australian Bureau of Statistics data showed.  

Australians are also more pessimistic about the economy, with the Westpac-Melbourne Institute survey of 1,200 people showing a 6.1 per cent plunge in July, following new lockdowns in Melbourne.

The index reading stood at 93.7 points. Any number below 100 suggests pessimists outnumber optimists.  

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