RBA interest rates: Mark Bouris’ tips for Australian mortgage holders

Australians are bracing for base interest rates above 1 per cent ahead of the RBA’s board meeting on Tuesday.

It will be the third rise in as many months, after the RBA increased rates by 50 basis points to 0.85 per cent in June, 35 days after they were first increased in May from a record low 0.1 per cent.

Economists are also predicting further rises, with the base rate likely to be above 2 per cent by the end of the year.

It’s time to check your interest rate

Yellow Brick Road executive chairman Mark Bouris says mortgage holders who fail to check their interest rates will feel the pinch as rates increase.

“There’s a huge swath of Australians who never bother to check their interest rate,” Mr Bouris said.

“They don’t know if they’re paying too much and they never actually refinance, so at the end of the day they’re paying way too much.”

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Not only can mortgage holders on a variable rate save thousands of dollars by getting “on top” of their finances, but also those finishing up on their fixed rate term can benefit as interest rates rise.

Take a mortgage holder who, five years ago, took out a $500,000 loan over 30 years, with an interest rate of 3.35 per cent and monthly repayments of $2463.07.

According to Yellow Brick Road’s calculations, they can save up to $28,000 in interest if they were to refinance to a 2.48 per cent rate today, saving $490.06 a month.

“You can’t sit back and complain about rate rises, when you can effectively save 4 rate rises by refinancing,” Mr Bouris said.

Comparing Australia to America where mortgage holders there finance regularly, Mr Bouris says Australians need to stop getting “comfortable” and instead recommends that borrowers refinance every quarter.

“You should be going one step further and should have a mortgage broker on tap that you check in with every month,” Mr Bouris said.

“And if you have a good mortgage broker, they should be checking in with you … In other words, the broker does the work for you.”

Be cautious of cashback deals

A selling point to entice mortgage holders to refinance is cashback deals, where banks and lenders can award borrowers with as much as $4000 for changing their loan provider.

However, Mr Bouris warns that sometimes cashbacks can do more harm than good if you don’t understand what you’re signing up for.

“I would be wary of cash grabs as you are never going to outsmart a lender and they will always somehow get it back, if not now, over time,” Mr Bouris said.

“I would be looking for the hottest rate which will give me the same amount of money that I currently owe.”

Mark Bouris is the Executive Chairman of Yellow Brick Home Loans, for more information on getting the best home loan, refinancing and some of the industry’s leading expert tips visit the Y Home Loans website.