Beginner's guide to knowing if your rate is high

If your rate sits more than 0.5% above what similar borrowers are getting today, you're likely paying more than you need to.

That difference might sound small, but on a typical Boronia home loan it adds up to hundreds of dollars every month. The question isn't whether rates have moved since you last checked. It's whether your lender has left you behind while offering lower rates to new customers. Many have.

How to find out what rate you're actually on

Log into your online banking and look for your current interest rate. It should appear on your home loan account summary or recent statement. If you have a variable rate, this is the figure that determines your repayments right now. If you're on a fixed rate that expired in the last year or two, you've probably rolled onto a variable rate without realising it, and that rate is often higher than what the same lender offers new customers.

Once you have your rate, write it down. You'll need it for comparison.

What counts as a high rate right now

A rate is high if it's noticeably above what you could get elsewhere with the same loan size, deposit, and property type. At current market conditions, most owner-occupier variable rates with principal and interest repayments sit between 5.9% and 6.5%. If you're paying above 6.5%, your rate needs attention. If you're between 6.2% and 6.5%, it's worth checking what else is available.

Consider a Boronia homeowner with a loan balance around $450,000. If they're on 6.6% and could refinance to 6.0%, they'd reduce monthly repayments by roughly $200. Over a year, that's $2,400. The gap widens further if your current rate is above 7%, which we still see among borrowers who haven't reviewed their loan since their fixed rate expired.

Why your lender hasn't told you

Lenders don't send you a letter when they start offering new customers a lower rate than you're paying. They're not required to. They will contact you when your fixed rate is about to end, but the rate they offer in that letter is rarely the lowest one they have available. It's the rate they hope you'll accept without asking questions.

This is particularly common in areas like Boronia, where many households took out loans during the fixed rate rush a few years back and have since rolled onto variable rates that haven't been reviewed. Your lender assumes you'll stay unless you take action. Most people do.

How to compare your rate properly

Don't just look at the advertised rate. Check the comparison rate as well, which includes most fees and gives a more accurate picture of what the loan actually costs. Then make sure you're comparing the right loan type. Investment loan rates are typically higher than owner-occupier rates. Interest-only rates are higher than principal and interest. If you're comparing your investment loan rate to an advertised owner-occupier rate, the gap will look larger than it is.

Once you've found a few home loans that match your situation, the difference becomes clear. If your current rate is 0.3% to 0.5% higher, refinancing is worth exploring. If the gap is 0.7% or more, you should act.

What refinancing actually involves

Refinancing means switching your loan to another lender who offers a lower rate. You're not paying off your home early or restarting the clock on your loan term. You're moving the remaining balance to a new loan with different terms. The new lender pays out your old loan, and you start making repayments to them instead.

Most refinances take three to five weeks from application to settlement. You'll need to provide income documents, a rates notice, and recent statements. The new lender will value your property, but you won't need to pay for that upfront. If your loan balance is below 80% of your property's current value, you won't need to pay lender's mortgage insurance again.

There are costs involved. Discharge fees from your current lender typically sit between $300 and $500. If you're leaving a fixed rate early, break costs may apply, though most fixed rates have already expired by now. Application fees vary, but many lenders waive them. A mortgage broker can walk you through the actual costs based on your specific loan.

When staying put makes more sense

If your rate is only 0.2% higher than the market and you're planning to sell within the next year, refinancing may not be worth the effort. The same applies if your loan balance is very small. Switching lenders for a $100,000 loan to save 0.4% gives you about $400 a year, and after costs, the benefit shrinks.

You should also stay if your current lender will match or come close to the rate you've found elsewhere. Some will, though most won't unless you ask. It's worth a phone call before committing to a refinance. If they agree to drop your rate by 0.5% or more and put it in writing, you've solved the problem without changing lenders.

One decision that doesn't wait

If your rate is high, it's costing you money every month you wait. The process to fix it is straightforward once you know what you're working with. Get your current rate, compare it against what's available, and decide whether the saving justifies the effort. In most cases right now, it does.

Call one of our team or book an appointment at a time that works for you. We'll tell you exactly where your rate sits, what you could move to, and whether the numbers make sense for your situation.

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