iscover
iscover 
With potential savings of billions of dollars across the country, it’s time for home owners to take a closer look at their loans.
According to Statista, there are over 10 million households in Australia. Even if we conservatively estimate that 7 million of these are home owner households with mortgages, the numbers reveal a compelling opportunity.
If just 50 per cent of these home owners proactively refinanced every 18 months – accounting for those who may not be eligible or inclined to refinance – the collective savings could reach approximately $8.75 billion every 18 months. That translates to roughly $5.83 billion per year that could be injected back into the Australian economy.
What could this level of savings mean for Australia? The implications are substantial:
- Increased household spending: lower mortgage repayments could free up disposable income, empowering home owners to spend more in other areas and stimulating economic activity.
- Reduced financial stress: reducing the burden of hefty repayments can significantly reduce the financial stress on households and contribute to improved well-being and productivity.
- Economic growth: a boost in consumer spending could be the catalyst the country needs for overall economic growth and job creation.
Why aren’t more home owners refinancing?
Despite these clear benefits, many home owners remain hesitant to refinance. Many simply aren’t aware of the potential savings or find the refinancing process daunting and this “set-and-forget” mentality can lead to them missing out on better deals. Many mortgage brokers are also reluctant to proactively suggest refinancing due to fear of commission clawbacks, a mechanism where lenders recover commissions if a loan is refinanced too early.
The mortgage broking industry needs to evolve to better serve home owners, including:
- Proactive client care: a shift away from only focusing on new client acquisition towards a model that prioritises ongoing support and regular reviews of existing clients’ financial situations.
- Transparency and education: increased emphasis on educating home owners about the refinancing process, potential savings and the importance of proactivity in long-term financial planning.
- Challenging the Status quo: home owners need to be empowered and encouraged to actively question their current loan arrangements and be made aware that they can seek out brokers who offer proactive advice.
A different approach
Australian brokers face harsher clawback conditions compared to their counterparts in Ireland and Canada and there is a tendency to focus solely on acquiring new clients, but proactively looking after existing clients and ensuring they have the best possible loan structure is equally important.
Refinancing isn’t just about chasing the lowest interest rate for clients, it’s about regularly reviewing loan structures to ensure they still align with home owners’ needs, combining debts carefully to reduce interest costs and simplifying their finances with long-term planning that sets up a more sustainable financial future.
An example from Sab Arora of Eminence Finance, who was recently recognised with two Stevie Awards for innovation in customer service, was restructuring loans and consolidating debts that helped save his clients an average of approximately $37,000 per annum.
Brokers still need to overcome the likelihood of clawbacks by building stronger and longer client relationships that focus on communication and education strategies so clients know about the implications of early loan repayment.
Australian home owners have the potential to unlock billions of dollars in savings through refinancing, but they need to be prepared to challenge the status quo and ask their brokers about a more proactive approach to lift the heavy burden of their home loans.
Sab Arora is the founder of EFG.