A surge in SA homeowners and investors rushing to the bank to refinance is expected if rates are once again cut on Tuesday.
Many have already done so, with finance brokerage Loan Market recording a 32.7 per cent increase in refinancing applications from SA borrowers in the year to early May compared to the previous.
A second cash rate cut for the year is expected at the RBA’s Tuesday meeting following one in February – the first in four years – when it was reduced by 25 basis points to 4.1 per cent.
Loan Market broker Daniel Zarkovic said many people had already made the most of the first cut, with more expected to follow.
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SA borrowers are expected to rush to their banks looking to refinance if the RBA cuts the official cash rate on Tuesday. Picture: NewsWire/Gaye Gerard
“We saw a clear uplift in refinancing activity following February’s rate cut and we’re expecting another spike in inquiries after Tuesday’s meeting,” he said.
Despite the rise, Mr Zarkovic said many borrowers continued to pay what’s known as the ‘loyalty tax’ – a term used to describe the higher rates paid by existing customers while new ones benefited from more competitive offers.
“People are busy and many assume their lender will automatically pass on rate cuts, but that’s not always the case,” he said.
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“There is still a large portion of borrowers with home and investment loans who are paying more interest than they need to.”
Mr Zarkovic said proactive brokers could help borrowers negotiate a lower interest rate or refinance, potentially helping them save thousands of dollars a year.
Real Estate Institute of South Australia legislation and industry adviser Paul Edwards said another interest rate cut would significantly benefit SA’s most vulnerable homeowners.
Real Estate Institute of South Australia’s Paul Edwards. Picture: supplied.
“For those at that more affordable end of the market, that sort of saving can have a much more noticeable difference to the family budget,” he said.
“If you’re living on the pension, these rate cuts make a huge difference, and if you’re living from paycheck to paycheck then that extra money each month can make a huge difference.
“Banks are pretty good with passing them on, but if they haven’t, shop around – every bank is desperate for your business and there’s a huge amount of competition between the banks.
“They’re out there to steal customers and it’s up to you to be diligent and make sure you’re getting the best bang for your buck.”
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