The Process Of Considering Refinancing

Now may be a good time to refinance a home loan because it appears that individuals are temporarily shying away from the housing market because of higher prices. Jason Cadden AAP stated in The Australian on October 14, 2013, that,”All major banks cut their standard variable rates followed the Reserve Bank of Australia’s (RBA) lead by a quarter of a percentage point or more.” If the RBA’s rate cut remains in force through the year, housing markets should improve. This will create an optimum climate for refinancing your home loan.

This situation along with the rising prices of homes in Australia makes home purchasing and refinancing an excellent choice for your budget.

Why Refinance Your Mortgage?

There are a number of reasons for home refinance :

Debt consolidation
Flexible payment plans
Early loan repayment
Saving money on current payments

Be certain to act practically upon refinancing. Refinancing just for the sake of a reduced point in interest rates will not benefit your situation a great deal. A good reason for refinancing might be a desire to repair your home, upgrade the heating system, or add space for a growing family.

The Relationship between the Reserve Bank of Australia and Interest Rates

Australians commonly assume that the RBA’s monthly changes are reflected directly in the rates that banks will charge for individual mortgage rates. However, after the financial crisis of 2007 banks have changed their process. They, indeed, pay attention to the RBA rate, but depending upon the bank, up to 40% of mortgage funding come from overseas money markets in Europe and the United States. This affects the Australian bank’s response to the RBA’s changes. Increases in the bank’s cost of money from overseas translates directly into higher borrowing costs for the Australian bank and affects the individual bank’s rates as much, if not more, than the RBA.

If you are in the process of considering refinancing, you need to pay attention to the international markets. There are several sites on the Internet that can help figure how changes in mortgage interest rates may be reflected in your payments. This would be an excellent time to act on your desire to refinance.