Broker - Smartfinn Advisors

Loan Essentials

August 2024

Inflation seems to be headed in the right direction, but Reserve Bank of Australia Governor Michele Bullock says a near-term cash rate cut isn’t on the cards.

So, where does that leave homeowners wondering whether now is a good time to refinance?

The decision as to whether to refinance depends largely on your individual situation and goals. Here are a few key considerations to think about when deciding whether or not to refinance.

The latest inflation data was promising

In case you missed it, the consumer price index (CPI) rose by 1 per cent in the second quarter of 2024, bringing annual headline inflation to 3.8 per cent.

While this was above the March quarter figure of 3.6 per cent, an important measure of underlying inflation (the trimmed mean) declined for a sixth quarter in a row, signalling inflation is still trending down.

The Reserve Bank of Australia (RBA) wants to get inflation within the 2 to 3 per cent target range, which looks likely to happen towards the end of 2025.

At its latest meeting, the RBA board decided to leave the cash rate on hold at 4.35 per cent. However, Governor Michele Bullock has since indicated a near-term cut in interest rates wasn’t on the cards.

So, should I refinance now or wait it out?

Without a crystal ball, it’s hard to know exactly when the RBA will cut the cash rate. However, refinancing may make sense if you fall under any of the following categories.

You’ve been with the same lender for a long time

Refinancing can be onerous, but it could be worth the effort. If you’ve had the same home loan for several years, chances are you could be getting a better offer with another lender.

You’ve never heard of a redraw facility or offset account

Certain loan features and tools may help you save interest and get ahead, so it’s worth considering refinancing.

With a redraw facility, for example, you could make extra repayments on your mortgage and save on interest, but still access funds should you need them.

An offset account, on the other hand, allows you to deposit money into a transaction account that’s linked to your mortgage. Deposited funds are offset against your loan balance, reducing your interest.

Your situation has changed

Have your financial circumstances changed since you took out your original home loan? If so, all the more reason to consider refinancing to a home loan that marries with your current financial situation and long-term objectives.

Your debt is feeling unmanageable

If you’re juggling multiple debts at once, such as a personal loan and credit card debt, it may be worthwhile considering debt consolidation.

With debt consolidation, you essentially roll all your debts into your home loan. It means you only have to make one repayment, making it easier to manage your debt.

It’s important to remember that you may end up paying more interest over the life of the loan if you go down this road, so speak to us and we’ll crunch the numbers for you.

You want to access your equity

Want to make a big-ticket purchase, like buying an investment property or doing a home renovation? Refinancing can help you achieve these kinds of goals.