The Reserve Bank of Australia (RBA) has planned its next monetary policy meeting for May, and there are already rumours of rate cuts. This meeting could be a pivotal moment for homeowners, investors, and even novice buyers. For existing mortgage holders, this is the ideal moment to carefully plan their refinance strategy and act before official announcements are made.

Do you know the reason? 

Because getting ahead of the RBA's decision could result in improved rates, loan terms, and overall financial positioning. 

This blog aims to help you navigate the refinancing maze ahead of the May deadline while also enabling you to make the most of Australia's evolving lending space.

 

What Does Refinancing Mean

Refinancing is defined as the act of replacing an existing home loan with a new one provided by either the same lender or a different lender. The main objectives are better terms, reduced interest rates, lower fees, or enhanced features like offset accounts and redraw facilities.

Let's say you refrained from locking in your mortgage's fixed rate during the peak 2022 interest rates. There's a good chance you are paying substantially more than what's available today. Refinancing helps take advantage of the current interest rate climate and frees you from outdated terms.

Yet, refinancing is not solely about attaining lower rates or freeing you from an old loan. It is also an opportunity to make adjustments on the loan features, switch to another mortgage product, rebuild your credit score, better afford your current financial state, or even consolidate debt.

 

Why Take Action Before the RBA Meeting

With the RBA meeting coming up, certain crucial points must be noted, particularly the timeframe around the official announcement.

Beat the Rush: Everyone tries snatching a good offer, which means refinancing goes through the roof and lenders get bombarded, and special discounts can vanish in the blink of an eye. We know that after an RBA announcement (especially if it's a rate cut) queues tend to move and increase, so first come, first served.

Lock in Competitive Offers: Some lenders are already offering promotional rates and cashback deals ahead of schedule. These offers are subject to change, and if the RBA shifts its stance, promotional offers may get removed entirely. Locking a deal in now ensures you won't be losing out on great rates post-meetings.

Avoid Paying More For The Loan: Lower rates naturally benefit the borrower in the long term, however, the lead up to the cut may give lenders the chance to sneak in overpriced fees and remove flexible features from their products. Meeting refinance deadlines helps you lock in a competitively priced and feature-filled product.

 

Receive Personalised Guidance: Take full advantage of the time before the RBA meeting and engage with a mortgage specialist to form the best plan for your unique refinancing situation, rather than presuming a one-size-fits-all approach. Understanding the complex nature of various loan products ensures you do not have regrets later, and mortgage brokers are there to help you navigate through the confusion.

 

Fixed vs Variable: Which One Should You Pick Now?

 

Choosing between fixed and variable rates is one of the most prominent issues associated with refinancing. Cutting rates are predicted for the end of this year or early next year. Thus, the window for favourable timing is narrower.

Fixed rates offer protection and peace of mind. If you are on a low income or are financially strapped, a fixed rate provides comfort as your repayments will remain the same over the term of the loan, usually between 1 and 5 years.

You end up losing out on potential rate reductions offered in the market. If, for any reason, you decide to break a fixed rate before the term is complete, exit fees can apply.

 

Variable Rates: Variable rates are more sensitive to the cash rate set by the RBA. If you are to use variable products, you stand to benefit from lower repayments in the months to come.

The RBA does not operate without reason. Should they opt to increase cash flows into the market, you can find yourself dealing with high repayments.

 

Pro Tip: Having said all this, many Australians still prefer split loans, which are part fixed and variable. This method elegantly combines the assurance of a fixed rate with the unpredictability associated with a variable-rate loan. You maintain a degree of predictability in your expenses while still benefiting from market-rate declines.

 

Avoid These Mistakes When Refinancing Your Loan

 

Refinancing offers a plethora of benefits, but it can also go haywire due to a few factors. Listed below are mistakes commonly encountered during the refinancing process.

 

Seeking Rates Exclusively: Flexibility restrictions, increased exit costs, poor customer service, and high exit fees can all come dragging along when chasing for a lower rate. Lowering interest payments may be alluring, but avoiding restrictions or exit fees is non-negotiable. Always analyze the overall terms of your loan as opposed to simply the interest rate.

 

Ignoring Loan Features: Loans that come with offset accounts, redraw facilities, and extra repayment options allow for better money management, improving the chances of clearing them off quickly. It is essential to ensure that your new loan comes equipped with the desired features that add value to assist in achieving your financial goals, as failing to do so would be of no use.

 

Neglecting Loan Conditions: Some deals that offer loan refinancing come with longer loan durations, resulting in higher interest costs throughout the loan. Double-check to ensure there are no hidden terms or costs that may lead to spending more in the future. Even if the monthly payments are cheaper, avoid terms that are not favourable in the long term.

 

Delaying the Process: Lots of people postpone refinancing their loan until the “perfect” time. The best outcomes tend to come when action is taken as early as possible, especially before major RBA announcements. Wait too long, and the best rates or offers may no longer be available.

 

Refinancing with OM Financials: Why It Works

• Access 40+ Lenders: We obtain referrals from numerous bank and non-bank lenders, ensuring that you are receiving an optimal deal.
• Zero Guesswork: We tailor, asses,s and design whether a fixed, variable, or split loan will best suit your financial requisitions.
• Negotiation Power: We negotiate on your behalf for blatantly better rates, cashback offers, and diverse loan features to ensure that your refinancing is worth every dollar spent.
• Full Transparency: With OM Financials, there are no hidden surprises. You will always know the pros and conbeforeto signing any document.

RBA Announcements Have You Feeling Like Post-Cut Craziness? Want To Get Ahead Of The Rush?

Don't wait until the RBA announcement, act fast! 

OM Financials is here to make refinancing strategic and stress-free for you! We understand that high interest rates and poorly structured loans can make refinancing a smooth process.

With over 50 trusted bank and non-bank lenders, we help you compare, choose, and lock in refinancing at the lowest possible rate. Contact Us at: 0478 876 967 /Book Your FREE Consultation Today to get the right loan without the hassle and delay.