So desperate are lenders to stem a borrower exodus – refinancing spiked to a record high of $18.1 billion last month – that they are offering unprecedented interest reprieves. But it is all happening behind closed doors, on a case-by-case basis.
All that is being publicly announced is price slashing on basic home loan products, which do not come with offset accounts.
Home owners are moving away from the big-four banks in search of better deals.Credit:Paul Rovere
Without an offset account yourself, you either have such a mortgage with a larger lender or one with a non-bank, online lender that cannot offer them. Either way, you could obtain an instant discount on your variable interest rate portion of your loan.
For other readers, the best way of doing so is threatening to take your business to a cheapest-in-market loan with an offset account: in the low 3 per cent range. Anyone paying a rate that starts with a 4 or 5 should today be thinking about jumping ship.
However, your fix stops you from leaving, so your best approach is to instead explain that you are a single mother who is now more strapped for cash, and you know that 1 percentage point discounts for existing customers are common.
If successful, I would keep the repayment saving in a high-interest savings account, so you could retain emergency access to it.
The thing is that paying money directly into a home loan can act like a one-way trap door, particularly in tight times. Lenders can lock it up if you get into financial difficulty, or even simply recalculate your loan balance and subsume it.
When your fixed-rate term ends, you could look at refinancing to a product with a flexible offset account because, in almost perfect timing for your expiry, rates are forecast to fall from the middle of next year.
And you will already have a mortgage-freedom head start.
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