August 8, 2016
Lenders are duelling with each other to offer cheaper refinance rates, while Australians are saving on mortgage repayments by negotiating with lenders. Consequently, lenders are hoping to pilfer customers from their rivals.
According to lenders, the number of loans that they are refinancing has grown significantly. In fact, lenders have not seen refinance rates this high in almost five years. For this reason, many lending institutions are saying the funding for new home loans has given way to refinancing.
The Commonwealth Bank states that during 2015/16, it has refinanced a greater share of owner-occupied home loans. This bank estimates 28.5 percent of its loans are refinance rate based compared to 25 percent for new property.
Recent figures published by the Australian Bureau of Statistics (ABS) indicate that the number of owner-occupied mortgage approvals has jumped. ABS data implies refinancing approval rates reached record highs in December 2015 and January 2016 recording 36 percent. These rates are as much as 4 percent greater than those registered in 2015.
Increases in borrower refinancing levels suggest there is a high degree of competition among lenders to offer cheaper refinance rates. It also indicates that borrowers are comparing mortgages, then negotiating to find more affordable rates.
Interest rates are at historic lows, and looking to get lower. So, borrowers are beginning to understand that now is the right time to consider their options. Negotiating cheaper refinance rates, allows borrowers to pay more off their principal and reduce their mortgage.
Softer housing market growth also encourages lenders to become more competitive. Thus, eagerness is due to lending institutions wanting to increase their loan market growth.
CoreLogic RP Data state the average annual growth for capital city housing was around 6.4 percent to March 2016. Comparatively, the annual growth rate was around 11.1 percent in July of 2015. Westpac, Australia’s second-largest bank, said that it had been aggressively discounting their refinance rates so that they attracted new customers. Other lenders admit doing the same.
Now could be the ideal time to look into refinancing, especially if you have never considered it before. As a result, you may be able to shave thousands off your home loan costs. On behalf of those who do not know, refinancing means taking out a new home loan to pay off your existing loan. By taking out a new home loan, you can reduce your monthly mortgage repayments. Plus, you can gain additional home loan features.
Refinancing means switching lenders so that you can get a lower interest rate. However, your existing financial institution may also be able to offer you a better refinance rate. With lenders wanting to retain customers and competition between banks being fierce, you can use this to your advantage. Hence, you should seek to negotiate a better deal with your existing lender. Should your current lender not provide you with a better deal, then look to other lenders.
Written by Refinancing.com.au
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