June 25, 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 of over 1,000 Australian homeowners with a mortgage, undertaken by Mortgage Choice, found 24% of respondents intend to refinance their current home loan. Of these, 36% have had their home loan for four or less years.
Of 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 to consolidate 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 to refinance to improve their lifestyle. For example, 14% of respondents were considering refinancing to access additional funds for a renovation while 10% were looking to do 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.
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.
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.
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 loan and lender options available, a great first step for anyone looking to make changes to their home loan situation is to talk to a mortgage broker, like Mortgage Choice. We can help make the decision easier by exploring your needs and assisting you to compare apples with apples.
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.
If you want to learn more about your home loan options, call us on 9432 6070 or click on he 'contact us' tab at the top of this page.