Refinancing Increases Across Australia

August 8, 2016


The latest data suggests the number of homeowners refinancing home loans is on the rise with the number of borrowers who took steps to switch their mortgage rising from 10% to 35% from 2015 to 2016. Economists suggest banks turn their attention towards homeowners, rather than investors when offering the best refinance home loans deal. This advice comes after report findings indicate credit growth will be stronger in this sector. Therefore, lenders offering homeowners better deals can expect to gain a larger share of the market.

Brokers Role in Refinancing Home Loans

Home prices are continuing to increase across Australia, though at slower than previous rates. As a result, appreciation in home values is expected to drive refinancing. Hence, lenders looking to capture a larger market share need to target the right customers by using correct channels. The most used channel for refinancing is brokers. According to data, more than 75 percent of refinances turn to a broker to find them a better deal.

A recent report released by JP Morgan implies brokers have played a part in initiating the increase in refinancing home loans. Information also suggests banks and lenders look at prioritising the use of brokers, rather than using branch services. Thus, the number lending institution branches decline further.

Of the major lenders using brokers, the ANZ is leading the way. So, this bank’s market share is larger. Generally speaking, the ANZ’s approach may encourage other lenders to consider using more brokerage services in the future.

Who is Electing to Refinance?

Data collected looked at refinance home loan rates based on borrower groups over 2013 and 2015. As a result, information indicates young, and growing families are the most likely group to refinance their home loan. Figures also suggest more than 60 percent of this group expected to consider refinancing over the next year.

Closely following behind growing families is the mainstream suburban group, considered as mid-income and middle-aged persons living in the suburbs. Furthermore, the battling urban group, those with no residual income in regional areas, were also seeking to refinance. Plus, the report states that around 30 percent of participants expected to refinance over the next year.

Of all groups seeking a better refinance home loan rate, the least interested was rural families or farmers. Less than 5 percent of this group said they would refinance within 12-months.

Why is Refinancing Popular?

Based on report findings, the primary reason for finding a better refinance home loan rate was to reset mortgage terms”. Mortgage terms typically included interest rates and the amount borrowed. In effect, refinancing allowed borrowers to reduce their monthly repayment figure and to increase their cash flow.

Other reasons for refinancing included reducing the amount of loans and debt, and freeing up equity. These options gave borrowers choosing a better refinance home loan rate greater financial control and freedom. Under these circumstances they could then make their money work for them more efficiently.

Investor Barriers to Refinancing

The number of investors borrowing has dwindled. Nevertheless, this is not due to them not wanting to buy property. One of the biggest barriers for investors securing better refinance home loan rates are lending regulation changes. Consequently, the introduction of the Australian Prudential Regulation Authority (APRA) has made it harder for investors to get funding. As a result, many are now apprehensive to try.

Related data implies around 10 percent of investors claimed they could not get the financing that they want. Other barriers include changes to their budget, former property purchases, and financial restrictions inhibiting the purchasing of more property. Plus, many also found current prices were too high for them to consider buying.

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