Rapidly rising interest rates and higher living costs are pushing record numbers of borrowers to refinance their home loans.
According to Finder, a record $14 billion worth of home loans were refinanced with a new lender in Australia in August.
It was an increase of 13 per cent compared to July and 20 per cent up over the year.
This includes a record 27,667 borrowers who refinanced with a new lender in August 2022, up from 23,642 a year earlier.
Borrowers with a $500,000 mortgage face a cumulative $735 a month hit to their family budget, as a result of rising interest rates.
They are now paying $8,820 more per year courtesy of the Reserve Bank of Australia cash rate rises, which started in May.
Head of Consumer Research at Finder, Graham Cooke said rapidly increasing interest rates had led to a lot of pressure for borrowers.
“Borrowers are scrambling to cut costs on their mortgage where they can,” Mr Cooke said.
“Repayment spikes are just too much to manage for millions of households causing a rush to refinance.”
Finder’s Consumer Sentiment Tracker reveals that in the past three months, 25 per cent of borrowers struggled to pay their home loan.
Mr Cooke said many had taken on too much debt when interest rates were low.
“Refinancing to a better deal can dramatically lower your costs and increase your savings,” he said.
“With at least one more rate rise predicted in the short term – the full impact of increasing rates is not expected to be felt until early next year.
“Finder’s Consumer Sentiment Tracker has seen a significant rise in the number of households who are stressed about their housing, grocery and petrol bills over the last 20 months.”
Mr Cooke said there were some simple steps to cut back on everyday expenses.
“Loyalty doesn’t pay – shop around for the best deals on all your expenses,” he said.
“It’s also a good idea to start a budget if you haven’t already.
“Knowing where your money is coming from and where it’s going is a critical step in getting on top of your finances.
“Once you have a rough idea of your spending habits, you can figure out where there’s room to cut back.”