While inflation seems to be improving, Reserve Bank of Australia Governor Michele Bullock has indicated that a short-term cut in the cash rate isn’t expected. So, if you’re a homeowner contemplating refinancing, what should you consider?
The latest inflation data was promising
The latest inflation figures offer some hope. The consumer price index (CPI) increased by 1 percent in the second quarter of 2024, pushing the annual headline inflation rate to 3.8 percent. Although this is slightly up from the 3.6 percent reported in the March quarter, a key measure of underlying inflation (the trimmed mean) has been declining for six consecutive quarters, suggesting that inflation is on a downward trend. The Reserve Bank of Australia (RBA) aims to bring inflation within the 2 to 3 percent target range, which is anticipated by the end of 2025.
The RBA recently decided to keep the cash rate steady at 4.35 percent. Despite this, Governor Michele Bullock has indicated that a near-term rate cut isn’t likely.
So, should I refinance now or wait it out?
Without knowing exactly when the RBA might lower the cash rate, here are some scenarios where refinancing could be beneficial:
Long-Term Lender Relationships
If you’ve been with the same lender for years, you might find better terms with a new lender. While refinancing can be a hassle, it could be worth exploring new options to see if you can secure a more favourable deal.
Unfamiliar with Redraw Facilities or Offset Accounts
If you’re not using features like a redraw facility or an offset account, refinancing could be advantageous. A redraw facility lets you make extra payments on your mortgage while still allowing access to those funds if needed. An offset account lets you deposit money into a linked transaction account, reducing your interest by offsetting the balance against your loan.
Changed Financial Circumstances
If your financial situation has changed since you took out your original loan, refinancing might help align your mortgage with your current needs and long-term goals.
Your debt is feeling unmanageable
If you’re managing multiple debts, such as personal loans or credit cards, debt consolidation through refinancing might simplify your finances. This involves rolling all your debts into your mortgage, which means making just one payment. However, this could result in paying more interest over the life of the loan, so it’s important to calculate the costs carefully.
You want to access your equity
If you’re considering major purchases like an investment property or home renovations, refinancing can help you tap into your home’s equity to fund these goals.
We can help you navigate the choices available and find a home loan that fits your specific needs and objectives.
Get in touch with your 1st Street Mortgage Broker today.
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