NEWS & INSIGHTS | MORTGAGE BROKERS | PALM CAPITAL

The Future of Interest Rates: Should You Refinance Your Home Loan in the Next 12 Months?

As interest rate uncertainty continues into 2024, many homeowners are wondering if now is the right time to refinance their home loan. Refinancing can offer the chance to lock in a better rate, reduce your monthly repayments, or access better loan features. In this article, we’ll discuss expert interest rate predictions for the coming year and help you determine if refinancing in the next 12 months is the right move for you.

Are-Rental-Properties-Still-a-Good-Investment-in-Australia-1024x575

Why Homeowners Are Considering Refinancing Now

Refinancing your home loan can provide several benefits, particularly if you anticipate changes in interest rates. The main reasons homeowners consider refinancing include:

Locking in a lower rate: If you’re on a variable rate, refinancing to a fixed-rate loan could protect you from future rate hikes.
Lowering monthly repayments: Refinancing can help reduce your repayments, especially if you qualify for a loan with a lower interest rate.
Accessing additional loan features: Refinancing gives you the opportunity to switch to a loan with better features, such as offset accounts, redraw facilities, or flexible repayment options.

What Experts Are Predicting for Interest Rates in 2024

The direction of interest rates over the next 12 months is uncertain, with experts offering mixed predictions.

Potential Rate Increases: If inflation remains a concern, the RBA may increase rates to keep the economy in check. This would make borrowing more expensive for homeowners, increasing the cost of variable-rate loans
Possible Rate Stability: Some experts believe the RBA may hold rates steady if inflation stabilises and economic growth slows. This would provide homeowners with more certainty and fewer rate shocks.
Unlikely, but Possible Rate Cuts: While rate cuts are unlikely, a major economic downturn or rapid decline in inflation could prompt the RBA to lower rates. This would benefit homeowners with variable-rate mortgages, but it’s not a scenario you should rely on.

Is Now the Right Time to Refinance?

Whether refinancing is the right decision for you will depend on several factors, including your current loan, your financial situation, and your long-term goals.

If You’re on a Variable Rate: Refinancing to a fixed-rate loan could offer stability and protection against future rate increases. Fixed rates allow you to lock in your repayments for a set period, giving you peace of mind even if the RBA raises rates.
If You’re on a Fixed Rate: If your fixed rate is set to expire soon, now might be a good time to refinance and lock in a new rate. Refinancing before your fixed term ends can help you avoid reverting to a potentially higher variable rate.
If You Want to Access Better Loan Features: Refinancing also allows you to switch to a loan with features that better suit your needs. For example, if you want the ability to make extra repayments or access an offset account, refinancing can help you find a more flexible loan.

Steps to Refinancing Your Mortgage in 2024

If you’ve decided that refinancing is the right move for you, follow these steps to ensure a smooth process:

Review Your Current Loan: Start by assessing your current loan to determine if it still meets your needs. Check your interest rate, loan features, and whether any break fees or exit costs apply.
Compare New Loans: Use a mortgage comparison tool or work with a broker to compare new home loans. Look for a loan with a competitive interest rate, low fees, and features that suit your financial goals.
Submit Your Refinancing Application: Once you’ve found the right loan, submit your application to the new lender. They’ll assess your financial situation, including your income, expenses, and credit score, before approving your loan.
Settle Your New Loan: After approval, your new lender will pay out your existing loan, and you’ll begin making repayments on your new loan.

Conclusion

Deciding whether to refinance your home loan in the next 12 months depends on your individual circumstances and the direction of interest rates. If you’re on a variable rate and expect rates to rise, refinancing to a fixed-rate loan could help you save money and protect your finances. Speak to our mortgage brokers today to explore your refinancing options and secure a better deal on your home loan.