Ten ways to reduce the cost of rising mortgage rates

A typical $1 million owner-occupier property borrower on a variable rate of 5.86 per cent with 25 years remaining on their mortgage should be able to reduce their interest bill by between $24,500 and $40,000 over the next three years, according to analysis.

A record of almost $18 billion in housing loans were refinanced with a different bank during August, according to government analysis. “Apathy among borrowers about rising rates will be the big danger,” says Hyman. “It’s more important than ever for borrowers to seek the best rates and not sit on their hands.”

“Borrowers can more easily negotiate on things like interest rates while still having access to the same benefits they are accustomed to with their current lender. They also don’t have to complete a loan application, change their banking details or pay new fees and charges.” A “mediocre” refinancing to a new rate of 5 per cent would save the borrower about $24,500 in interest over three years.A “competitive” rate of 4.7 per cent would reduce interest by about $33,500, taking the first month of repayments to $5672, while an “outstanding” deal would be 4.50 per cent and overall savings of $39,400. The first month after refinancing would see that borrower pay $5558.

“What ultimately matters is the rate you’ll be charged, not the size of the discount, so do a commonsense check to make sure it is competitive.”Don’t be afraid to have a hard chat with your lender“Get to know your home loan and make sure it is suited to current market conditions,” says Brad Cramb, chief executive of distribution at Lendi Group.

For example, a borrower with a $500,000 loan with $20,000 savings in an offset account will pay interest on $480,000. But if the offset balance is always low, say, less than $10,000, it might not be worth paying.Christopher Foster-Ramsay, principal of Foster Ramsay Finance, recommends preparing a budget and listing monthly expenses, savings and debt.

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