Switch Off The Cruise Control
The Age
Wednesday August 28, 2002
The gap between the interest rates of big banks and smaller non-bank lenders is narrowing, which may lead some borrowers to believe there is less reason to consider refinancing their loan.
However, this does not mean borrowers should ignore an opportunity to give their loan a bit of a nip and tuck. Some financial advisers suggest an annual review.
"Having a mortgage is just like owning a vehicle ... you have to get it serviced,"
the director of interestrate.com.au Andrew Barbazza advises. "Borrowers shouldn't adopt a cruise-control mentality."
Mr Barbazza says most inquiries directed to his company come from borrowers who feel their expected level of service is not being met or that interest rate changes may offer them a better deal elsewhere.
Australian Bureau of Statistics figures show 20 per cent of home loans signed off in Australia are the result of refinancing.
"It is a big chunk of the market," Mr Barbazza says.
Borrowers who find changes in their financial situation may also find it advantageous to re-evaluate their home loan. This can be as easy as picking up the phone or logging onto the Internet.
Interestrate.com.au offers a free mortgage review service that guides borrowers through the various rates and products lenders. Advisers are available for phone consultations (which can be as brief as 20 minutes) or a home visit.
"About 80 per cent of customers prefer to do it face to face though," Mr Barbazza adds.
Australian Consumers Association's Choice website recommends that before refinancing, borrowers consider the additional costs like termination and discharge fees, legal expenses and government charges. The site suggests borrowers talk to their current lender, who may be willing to swap them to another loan structure without applying penalties.
Further details are available on the websites www.interestrate.com.au or www.choice.com.au
© 2002 The Age