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As the Reserve Bank drops rates, borrowers are exploring options and connecting with different lenders. Brokers have a golden opportunity to support these refinances.
A report from Canstar revealed that in the June quarter, 98,681 borrowers refinanced their mortgages.
This is 21 per cent higher than the same period last year and 0.8 per cent higher than Q1.
Broken down further, total refinances equal 1,084 each day throughout the three-month period.
The savings are significant. A mortgage of $600,000 with 25 years remaining on a 6.36 per cent variable rate could be refinanced to a competitive rate of 5.25 per cent, said Canstar.
This would save the mortgage holder $403 each month and $12,124 over a two-year period.
Borrowers are keeping cost-conscious, with the data revealing that in the last three years, the average borrower refinanced a 0.82 per cent rate drop.
Canstar’s data insights director Sally Tindall said that borrowers are taking rates into their own hands, rather than solely relying on the RBA to cut rates.
She said that borrowers who aren’t exploring refinancing options are “blindly handing to their bank out of loyalty.”
“This exodus by borrowers away from sub-standard mortgage rates is terrific. The RBA might have served up rate cuts on a platter, however, that hasn’t stopped tens of thousands of Australians from seeking out even better deals,” said Tindall.
“As a result, we’ve gradually seen the average owner-occupier variable rate fall by a lot more than what the RBA has plated up, thanks to hordes of borrowers proactively switching lenders and haggling with their current bank for a better deal.
“The fact that the gap between the average and new customer variable rates for owner-occupiers has narrowed to basically nothing is testament to this.”
The power of refinancing was explored in a recent study from Mortgage Choice.
According to the report, the value of refinanced loans is up 22 per cent from last year.
Home owners are keeping on top of these opportunities, with nearly three-quarters (72 per cent) reviewing their home loan at least once a year. This figure sat at 59 per cent last year.
The key reasons behind reviewing their home loan were:
- To lower my interest rate (49 per cent).
- To consolidate debt (11 per cent).
- To increase or reduce my loan term (10 per cent).
- To lock in a fixed rate or switch from fixed to variable (or vice versa) (10 per cent).
- To access home loan features like an offset account or redraw facility (10 per cent).
Brokers should expect refinancing trends to continue as borrowers look to lower their repayments.
[Related: High number of home owners experiencing ‘buyer’s remorse’]
