Top 20 suburbs where homeowners can save money by refinancing

New research has ranked the top 20 ‘mortgage belt’ suburbs in Australia by how much homeowners could save by refinancing their mortgage.

The research was conducted by Reduce Home Loans, sorting suburbs by the estimated number of houses with mortgages to identify suburbs in the ‘mortgage belt’. The research assumed that in June 2019, buyers had purchased a house and paid the suburb’s median house price at the time, borrowed 90% of the purchase price and taken out a three-year fixed loan at 3.84% (the average three-year rate at the time).

The research made a series of calculations in June 2022 including how much the owner’s house would be worth, how much estimated equity they would have, what their estimated outstanding loan balance would be, what their monthly repayment would if their three-year fixed loan had reverted to a variable rate of 4.75%, how much they could save if they refinanced to a variable rate of 4.00% and how much they could save if they refinanced to a variable rate of 3.00%.

To establish a top 20 ranking, suburbs were ranked based on how many local houses were mortgaged (from highest to lowest).

The top 20 suburbs were situated in Victoria (14), NSW (4) and Western Australia (2).

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Reduce Home Loans general manager Josh Beitz (pictured) said the research was timely given that a host of borrowers had either recently come to the end of a two-year or three-year fixed-loan term, or would do so shortly.

“Some borrowers who have reverted, or will soon revert, from a fixed to a variable loan might find themselves on a higher interest rate, which of course would be concerning,” Beitz said.

“It’s important for those borrowers that can afford the rollover rate not to be complacent. That’s because the Reserve Bank is likely to keep increasing the official cash rate which will translate into much higher mortgage rates.”

Beitz said lenders always assessed borrowers at higher interest rates, so, as rates keep increasing, people’s borrowing power would be reduced.

“As a result, many borrowers will be locked out of refinancing,” he said.

“That’s why borrowers should seriously consider refinancing now to a comparable loan with a lower interest rate – because as rates keep increasing, borrowers can become ‘mortgage prisoners’ unable to escape spiralling interest rates.”

Beitz said the interest rate gap between higher-rate and lower-rate loans was already large and was likely to keep growing as interest rates keep increasing.

“Refinancing now could potentially add up to a saving of tens of thousands, or even hundreds of thousands, of dollars over the life of the loan. More importantly, it might make the difference to some people being able to keep their home or being forced to sell it in a depressed market,” he said.

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“All the suburbs on this ranking are showing life-of-loan savings of at least $69,000. That’s based on the assumption that borrowers have 27 years left on their mortgage and would be refinancing from an interest rate of 4.75% to 3.00%. It goes to show how powerful refinancing can be.”

The suburbs which rounded out Reduce Home Loan’s top 20 list are: