Interest rates are at all-time lows, yet many borrowers are missing out on the full potential of refinancing, research suggests.
A new report released by mortgage broking firm Aussie has revealed borrowers’ reluctance to refinance, including an apparent disconnect between understanding the opportunities offered, and being willing to take action at a time of favourable lending conditions and low interest rates.
Australian Bureau of Statistics (ABS) data reveals that of the 6 million active mortgages in the market, only 445,000 have been refinanced in the last financial year.
Aussie’s research found that most Australian mortgage holders (53%) believe now is a good time to refinance, with 6 in 10 saying they’re not confident they currently have a good deal.
Yet over half (60%) have not reviewed their home loan in the last 12 months, while only 1 in 5 (20%) have acted and refinanced their mortgage in that time.
Of the mortgage holders surveyed, 60% had not reviewed their home loan in the last year and only 20% have taken action by refinancing their home loan.
Some of the reasons why Australians are not refinancing include believing it’s too hard or being unsure where to begin the process (22%), not believing they can get a better deal (18%), or concern that they will end up worse off or paying more money (24%).
A further 28% said they were unaware of their current home loan interest rate, despite rates being at one of the lowest points in many years.
Why refinance? Refinancing means taking out a new loan on your property and using it to pay out your current loan. It often involves moving to a new lender, though some people stay with their current lender; it really depends on where you can get the best deal and features that suit you.
Apart from saving money, it can free up funds for renovations or other expenses. Other benefits might include:
– Refinance cashback incentives
– Switching between fixed and variable
– Living expenditure
– Benefits of an offset or redraw facility
Internal data from Lendi Group (parent company of Aussie and Lendi brands) shows that refinancers could save around $2,000 by dropping less than 1% in their interest rate.
Just as with utility and insurance providers, it can be beneficial to review your home loan from time to time. Talk to your broker or lender to see what options are available for your financial situation, and whether you could benefit by refinancing.