June 08, 2022
New research commissioned by Mortgage Choice has revealed surprising insights into how Australians feel about their home loans, especially when it comes to refinancing. The research, completed by Honeycomb Strategy, is based on a survey of over 1000 Australian borrowers.
Over 60% of borrowers surveyed by Mortgage Choice identified refinancing as a “hassle I’d like to avoid” and 61% said they are “cautious about refinancing in case I end up worse off”. This reluctance to seek a better deal through refinancing is particularly interesting, given that 80% of borrowers surveyed identified their home loan as their biggest monthly expense.
The Reserve Bank of Australia’s Financial Stability Review April 2022 revealed that many borrowers had taken advantage of low fixed rates in recent years and in late 2021, almost 40% of outstanding housing lending had fixed interest rates. Over 90% of those fixed-rate loans due to expire in the next two years will face an increase in repayments. Investors with interest-only loans are among the fixed-rate borrowers who will likely face the biggest shock when their loans revert to principal plus interest repayments.
At its June monetary policy meeting yesterday the RBA raised the cash rate by 50 basis points to 0.85%. In his statement, Governor Lowe said he expects the Board to take further steps towards normalising monetary conditions. The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market.
Mortgage Choice National Sales Director David Zammit said, “With interest rates expected to rise several times more this year, I recommend that anyone with a home loan speaks to their broker about reviewing their current home loan. Many borrowers save hundreds or even thousands of dollars a year by switching."
“There can be many benefits to refinancing, including accessing a better home loan interest rate and lowering your repayments,” continued Mr Zammit. “You may also be able to secure a cash back deal or consolidate existing debts. Refinancing your home loan can also be a pathway to investing. While the latest PropTrack Home Price Index showed a small fall in home prices over May, PropTrack data reveals that home prices increased 35% nationally since the onset of the pandemic. If your property has increased in value in the last few years, you might be able to access your equity to fund a renovation, or to invest.”
The Mortgage Choice research found that only 24% of borrowers feel entirely confident navigating the refinancing of a home loan.
“Refinancing can feel daunting,” said Mr Zammit. "However, it’s important people know that with the right advice from an experienced mortgage broker. The worst thing that can happen is that you find out you’re already on the best rate for your situation, and you stick with that.”
Brokers are widely acknowledged as having access to the best deals and a growing number of Australians are seeking a broker’s help with their home loans. In fact, in the March quarter of 2022, mortgage brokers facilitated almost 70% of all new residential home loans, according to the latest data commissioned by the Mortgage & Finance Association of Australia (MFAA).
In Mortgage Choice’s research, almost 60% of borrowers surveyed agreed that brokers can get the best deals on home loans, and this number rose to 75% among those who have used a broker previously.
“I strongly encourage borrowers to speak to their broker before making a switch. Your broker can compare a range of products and lenders on market to see if there’s a better deal out there for you,” said Mr Zammit.