Top 20 suburbs where refinancing will save you big dollars

• 14 Victorian suburbs made the list, with four in NSW and two in WA
• Refinancing could save borrowers as much as $300K depending on their suburb
• Reduce Home Loans said the data is timely as many Aussies' loan terms are about to expire or recently have

Earlier this month, the Reserve Bank of Australia (RBA) announced another rise in the cash rate from 0.85% to 1.35%.

That news added to the financial anxiety of Australians, with the disquiet stirred up in headlines around Australia not particularly useful. The continual rise of interest rates should be expected and should not be feared.

While mortgage stress is indeed expected to hit one in four Australians, experts expect a return to what is near enough to business as usual.

Interest rates will return to pre-pandemic levels, or in other words, “normal”, and house prices will begin to moderate, and in some cases, fall; indeed, a rise in interest rates from extraordinary pandemic levels could be considered a sign our economy is firing back up.

The latest

New research has ranked the top suburbs where refinancing will save you thousands.

The research was commissioned by Reduce Home Loans, ranking the top 20 ‘mortgage belt’ suburbs in Australia by how much they could save if they refinanced.

Reduce Home Loans first established which suburbs were in the ‘mortgage belt’ by sorting suburbs by the estimated number of houses with mortgages.

The research then assumed that, in June 2019, buyers had purchased a house and:

• Paid the suburb’s median house price at the time,
• Borrowed 90% of the purchase price, and
• Taken out a 3-year fixed loan at 3.84% (the average 3-year rate at the time).

The next step involved calculations for June 2022:

• How much the owner’s houses would be worth,
• How much estimated equity they would have in their house,
• What their estimated outstanding loan balance would be,
• What their monthly repayment would be if their 3-year fixed loan had reverted to a variable rate of 4.75%,
• How much they could save if they refinanced to a variable rate of 4.00%, and
• How much they could save if they refinanced to a variable rate of 3.00%.

The final step was to rank suburbs based on how many local houses were mortgaged.

Reduce Home Loans manager Josh Beitz said the research is timely given many borrowers have either recently come to the end of a two or three year fixed loan term, or will do so shortly.

“Some borrowers who have reverted, or will soon revert, from a fixed to a variable loan might find themselves on a higher interest rate, which, of course, would be concerning. It’s important for those borrowers that can afford the rollover rate not to be complacent. That’s because the Reserve Bank is likely to keep increasing the cash rate, which will translate into much higher mortgage rates,” said Mr Beitz.

“Lenders always assess borrowers at higher interest rates, so as rates keep increasing,
people’s borrowing power will be reduced. As a result, many borrowers will be locked out of refinancing.

“The interest rate gap between higher-rate and lower-rate loans is already large, and is likely to keep growing as interest rates keep increasing. So refinancing now could potentially add up to a saving of tens of thousands or even hundreds of thousands of dollars over the life of the loan. More importantly, it might make the difference to some people being able to keep their home or being forced to sell it in a depressed market.

“All the suburbs on this ranking are showing life-of-loan savings of at least $69,000. That’s based on the assumption that borrowers have 27 years left on their mortgage and would be refinancing from an interest rate of 4.75% to 3.00%. It goes to show how powerful refinancing can be.”

The full list

Source: Reduce Home Loans.

* Assumes borrowers have 27 years left on their mortgage and are refinancing from a 4.75% loan to a 3.00% loan.

The detailed list

Point Cook

Craigieburn

Tarneit

Berwick

Baldivis

Sunbury

Kellyville

Werribee

Dubbo

Truganina

Clyde North

Canning Vale

Melbourne

Doreen

Narre Warren South

Orange

Hoppers Crossing

Rowville

Castle Hill

Wyndham Vale

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Disclaimer: This article contains general information and should at no time be considered advice to the reader. The reader should always verify their situation with the relevant certified professionals before taking any further steps.