Refinancing could save borrowers hundreds of thousands

Time to beat the banks with a better deal. Picture: Rohan Kelly.

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More than 100 Australian banks have now passed on the RBA’s February rate cut, which means borrowers should be paying less interest on their home loans (that is, unless they are customers of Virgin Money or BOQ Specialist of course).

But exclusive new research by comparison site Finder shows borrowers are far better off at some lenders than others.

Customers of Police Bank, for example, are paying the lowest variable interest rate on the market at 5.59 per cent. Meanwhile, the highest rate on the market is 6.79 per cent at Bluestone.

A borrower with an average mortgage of $640,000 would pay about $180,000 less in interest over 30 years with Police Bank than if they were on the highest rate.

On a $1 million loan, the saving would be just under $300,000 over the loan term.

Finder head of consumer research Graham Cooke said that while not everyone will be eligible to switch from the worst rate to the best, it served as an example of the potential savings over the long term.

“Many homeowners may not fully grasp the potential impact refinancing could have on their financial situation,” Cooke said. “Most people were eagerly waiting for a rate cut, and are now hopeful for another. Our numbers show that the average Aussie can give themselves a rate cut right now by refinancing.”

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Cooke said that the fact every lender who dropped rates after the RBA cut passed them on in full was proof of “red hot” competition between banks.

“This is unprecedented,” he said. “What it means is that the ball is in the borrower’s court – rates are not rock bottom, but banks are fighting to keep and gain customers. You can use that to your advantage.”

Finder.com.au head of consumer research Graham Cooke.

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How often should I refinance?

A good mortgage broker will review your deal regularly and even call your lender periodically on your behalf to negotiate a better rate.

Otherwise, staying on top of what your bank offers every six to 12 months is a good habit to get into, according to Mortgage Choice broker David Thurmond.

“If you haven’t reviewed your home loan rate in the last six months, you should find out how it compares to what’s on offer now that most lenders have passed on the RBA’s cash rate cut,” Thurmond said. “I think we’ll see competition really ramp up once the RBA delivers another cut to the cash rate because history tells us not all lenders pass on subsequent cuts and those that do may not pass on the cut in full. The lenders that really want to fight for business will be quick to pass on future cuts.”

Better option than refinancing?

Switching banks is great when it’s worth it, but borrowers need to weigh up the hassle and cost against the end result.

The administrative cost of refinancing is approximately $700, so you should make sure your new deal will save you more than that amount fairly quickly, Thurmond said. There is also the hassle and time spent getting all your financial records together and all the forms to fill out.

The way to avoid this, Thurmond said, is to get your own lender to come to the party and match a better deal.

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“The path of least resistance for borrowers is to ask their existing lender to match a better rate in market. The best way to find out the best rate they can access is to speak to a mortgage broker who can compare their rate with what’s in the market,” he said. “Borrowers can then use this information to negotiate with their bank – or ask a broker to do it for them – and say ‘lender X can offer me this rate. Match, or beat it, or I’ll take my business elsewhere’.”

The secret deals

“What people don’t know is that a lender’s best rates aren’t advertised on their website,” Thurmond said. “As a broker we take those rates and then depending on the borrower’s profile, we can get discounts added to that rate. The discount is up to the discretion of the lender, but it usually comes down to the lender’s appetite for a particular type of borrower and will depend on the borrower’s loan to value ratio and the size of their loan. Generally speaking, a larger loan size will attract a better discount.”

Does your bank make the 50 best rate list? Picture: Luis Enrique Ascui

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If you go ahead and refinance

Banks are so keen for new customers, they will help make your switch as smooth as possible, Cooke said.

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“Jump online and find out what the lowest rate is right now. Second, call your bank and ask for a discount to this rate,” he said. “If your bank doesn’t budge then, third, go to a comparison site like Finder and find a refinance loan that suits your budget. Once you contact the new bank, they will generally take care of everything with the old one.”

Top 50 variable rates on market

Police Bank: 5.59%

Horizon Bank: 5.64%

Peoples Choice: 5.64%

Queensland Country Bank: 5.64%

RACQ: 5.64%

The Capricornian: 5.64%

Bank of China: 5.68%

MOVE Bank: 5.69%

Qudos Bank: 5.69%

Regional Australia Bank: 5.69%

The Mutual Bank: 5.69%

Abal Bank: 5.70%

Gateway Bank: 5.70%

Bank First: 5.74%

BankVic: 5.74%

BCU Bank: 5.74%

G & C Mutual Bank: 5.74%

Heritage Bank: 5.74%

Homestar Finance: 5.74%

Hume Bank: 5.74%

Illawarra Credit Union: 5.74%

Reduce Home Loans: 5.74%

Summerland Bank: 5.74%

Teachers Mutual Bank: 5.74%

Unity Bank: 5.74%

Unloan: 5.74%

Tiimely: 5.74%

Greater Bank: 5.74%

Newcastle Permanent: 5.74%

QBank: 5.74%

Police Credit Union: 5.74%

HSBC: 5.74%

Up Bank: 5.75%

NRMA Home Loans: 5.78%

Credit Union SA: 5.79%

IMB: 5.79%

loans.com.au: 5.79%

MyState Bank: 5.79%

ANZ: 5.84%

Auswide Bank: 5.84%

Bendigo Bank: 5.84%

Defence Bank: 5.84%

ubank: 5.84%

Bank Australia: 5.88%

Suncorp Bank: 5.88%

Qantas Money: 5.88%

AMP Bank: 5.89%

Aussie Home Loans: 5.89%

Beyond Bank: 5.89%

ING: 5.89%

Mortgage House: 5.89%

Pacific Mortgage Group: 5.89%

Worst five variable rates on market

Bluestone: 6.79%

Coastline Credit Union: 6.69%

Transport Mutual Credit Union: 6.69%

Broken Hill Bank: 6.64%

Virgin Money: 6.44%

Pepper Money: 6.39%

Source: Finder

*Excludes green loans. Eligibility and LVR restrictions might apply. Data as of 7th March 2025