June 26, 2013
With interest rates now at historically low levels, it is encouraging to note nearly one quarter of Australian mortgage holders are considering refinancing their current loan, with cost the major driver for the decision.
A recent survey* by Mortgage Choice of over 1,000 Australian homeowners with a mortgage, found of the 24% of respondents who were considering refinancing their current home loan, 36% of these have had their home loan for four or less years.
Speaking today about the survey findings, Belinda Williamson, Head of Corporate Affairs at Mortgage Choice, said, “Regarding the reasons given for the desire to refinance, cost was by far the biggest motivator, more than the ability to access additional funds or a preference for fixed or variable rate options.”
“Of those considering refinancing their current home loan, 45% of respondents said they would do so to switch to a ‘cheaper' loan, with cheaper defined as a combination of a lower interest rate, fees and charges.”
Other reasons given for refinancing were also connected to cost-cutting, with 22% of respondents saying they were considering refinancing to lower their repayment level, 21% were looking at consolidating their debts and 19% wanted to lower their fees (including redraw, offset account and annual fees). Rounding out the top five responses was ‘to have better loan features available to me', at 14% of respondents.
“While cost was clearly top of mind for mortgage holders, it was great to also see some homeowners looking at refinancing to improve their lifestyle. For example, 14% of respondents were considering refinancing to access additional funds for a renovation while 10% were looking at doing so to get access to funds for an investment property purchase. At the same time, 13% were motivated by the promise of having more money for other reasons such as a holiday,” Ms Williamson said.
When refinancing, 62% of respondents said they would consider changing both loan product and lender while 38% said they would stay with the same lender, but switch loan product. The majority of respondents said they would consider choosing a major bank; this was followed by a credit union and a building society.
Speaking about the lender and loan options available, Ms Williamson said, “It is very important for existing and new borrowers to investigate a wide range of home loan options and to be mindful that some smaller, perhaps lesser-known lenders may offer really competitive interest rates, low fees and beneficial features.”
Ms Williamson went on to say that of those considering refinancing, more than half (54%) said they would use a mortgage broker to help them through the process.
“With such a wide range of loans and lenders available, a great first step for anyone looking to make changes to their home loan situation is to talk to a mortgage broker. They can help make the decision easier by exploring your needs and assisting you to compare apples with apples,” explained Ms Williamson.
Ms Williamson concluded by saying, “With interest rates back on the agenda ahead of the Reserve Bank of Australia's monthly board meeting on 2nd July, savvy mortgage holders will naturally be keeping a keen eye on any movement in the cash rate.”
“Many economists say there is potential for more variable rate cuts this year, so it is always a good idea to educate yourself on the best loan options for you and to make certain you are still getting a good deal.”
For further information or to arrange an interview, please contact:
Mortgage Choice Corporate Affairs
(02) 8907 0472 / 0407 416 124
(02) 9018 8603 / 0412 550 004
*About the survey
Market research company Nine Rewards was commissioned by Mortgage Choice to conduct the 2013 Mortgage Choice Homeowner Intentions Survey. The Survey was completed by 1,032 Australians who have a mortgage and have been a homeowner for two or more years. The Survey was conducted in mid May 2013. Note, the figures in the media release commentary have been rounded to the nearest whole percentage point.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.