How much can home owners save by refinancing?
With no reprieve on the horizon for rising interest rates, a number of homeowners are choosing to refinance their home loan with 45% opting to switch lenders.
PEXA Insights’ Refinancer Sentiment Research report revealed borrowers who refinanced with a new lender were able to get more bang for their buck than those who stayed with their current provider.
The survey of 2,889 people conducted between May to June, and extrapolated using population data, found 1.04 million Australians refinanced their home loans over the past 12 months.
Of those one million refinancers, those who chose to refinance to a different lender were able to achieve an average annual saving of $1,908.
This is significantly higher than the $384 annual savings of those who refinanced with their existing lender.
Fifty-five per cent of refinancers stayed with their existing lender and were able to secure a 0.1% interest rate reduction.
Meanwhile, those who switched to a new lender were able to reduce their interest rate by approximately 0.5%.
Over the next two years, more than two million Australians will consider refinancing their home loans.
PEXA Insights Head of Research Mike Gill said current inflationary pressures and monetary tightening are the reasons for record high levels of refinancing.
“This momentum is set to continue, as mortgage holders are investing on average six weeks into researching options that best suit their circumstances,” Mr Gill said.
“Our consumer research confirms there is a level of uncertainty felt by mortgage holders.
“An estimated 71% feel anxious about the prospect of rising interest rates, 49% are worried about their job/financial security, and 73% are regularly reviewing their interest rate against market trends.”
What are the key drivers for refinancing?
The report found 81% of refinancers were intending to refinance within the next two years.
The majority of the respondents cited the following as their motivations for refinancing:
- Wanting a more competitive interest rate (29%)
- Needing to save money (9%)
- Broker recommendations (8%)
Other key reasons for refinancing also included changing personal circumstances, wanting to lock in a fixed rate, and anticipation of higher house prices.
Chief Lending Product Officer at ubank Kanishka Raja said Aussies are looking to refinance their mortgage to get ahead financially.
“Finding a more competitive rate means Aussies can potentially save on their repayments and take advantage of other product features like offset accounts, which also helps people repay their home loans faster,” Mr Raja said.
Ubank has recently boosted its cashback offer to $3,000 to $4,000 for those who refinance to the digital lender.
The offer is $3,000 for those refinancing at least $250,000, and $4,000 for refinancing $1 million or more.
Applications must be made by 30 November with settlement by 31 January 2023.
The offer excludes refinances within the NAB group, of which ubank is part.
By Hanan Dervisevic
Originally published by Savings.com.au
