Why are Record Numbers of Mortgage Holders Refinancing?

25th Jan, 2023 | Refinance

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Aussies are refinancing in record numbers.

Is your mortgage starting to feel like a millstone around your neck? You’re not alone. In fact, more and more Australians are refinancing their mortgages, seeking relief from high-interest rates and rapidly rising monthly repayments. So why are so many people taking this route? And is it the right move for you? Read on to find out.

Aussies are refinancing in record numbers

November 2022 saw a record number of owner-occupiers refinance: over $13 billion worth of refinancing occurred following unprecedented interest rate hikes.

Homeowners across the country were in unison in November, likely fed up with the consecutive months of aggressive rate hikes: they refinanced more mortgages than ever before. According to data released by the Australian Bureau of Statistics (‘ABS’), over $19.5 billion worth of mortgages were refinanced in November 2022. When compared to November 2021, this was a 20.4% increase from the year before, beating the previous record (set in September 2021) by nearly $1 Billion.

Mark Bouris said that this “refinance boom is a statement to lenders: keep rates competitive or your customers will head out the door.”

Learn how much you can save through refinancing.

“Far too many Aussie home owners have had a ‘set and forget’ attitude with their home loan.”

“Take Americans as an example, generally they refinance their loans every six months. They’re always looking for a better deal. I’m stoked that we’re finally starting to see an attitude shift in Australia, away from the interest rate indifference that borrowers generally have.”

“Unfortunately, it took a record breaking rate hiking cycle to kick us into gear, but fortunately it seems as though mortgage holders have had enough. They are taking control of their mortgage, by getting off their backsides and asking their lenders some tough questions, or by reaching out to a broker.”

“During this crazy rate hiking cycle, those who didn’t bother to check their interest rate will likely be starting to feel the pinch.”

“There were incredible savings to be had, but that’s not to say you’ve ‘missed the boat.’ My advice: be bothered to pick up the phone and ask your lender or broker a simple question: Am I getting the best deal possible?” 

“It’s non-negotiable in the current interest rate environment.”

Will refinancing save you money?

The answer will always vary depending on your circumstances.

There are fees associated with refinancing, which we’ve broken down for you here, however, when you work with a mortgage broker to assess whether refinancing is the right move for you, they will outline the pros and cons and help you make an informed decision on the right move for you and your circumstances. Crucially, a broker can accurately calculate whether refinancing could save you over the life of the loan, or save you on monthly repayments.

In a rising rate environment, refinancing has become less about maximising a borrower’s savings, and more about ensuring that a borrower can afford  repayments. Working with a mortgage broker can allow you to analyse whether there is a better home loan option out there to help ease some of the pinch of rising mortgage repayments. 

The key with any refinancing strategy is to act quickly. If you are experiencing or anticipate any future difficulties with your loan repayments, don’t delay, take action! With every interest rate rise, it becomes more and more difficult to qualify for loans of any given size, meaning the higher rates rise, the less you can afford to borrow. 

If you are able to secure a lower interest rate through refinancing, this will provide immediate relief, but it will also give you the opportunity to reset your loan term. Extending your loan term can provide significant cash flow relief when it is needed most. 

This may, however, increase the overall cost of your loan in the long run, but if your mortgage repayments become a significant point of stress in your life, it always pays to at least assess your options with an experienced and trusted mortgage broker.

Mark Bouris appeared on A Current Affair recently to emphasise that, in the right circumstances, refinancing could save you a thousands in interest over the life of the loan or save you significantly in monthly repayments.

What should you be aware of before considering refinancing?

It always pays to do some research about what deals are currently out there. Find your existing interest rate, and then compare rates from multiple lenders to see if your existing rate is competitive.

Also, think about how long you plan to stay in your home: if you’re only staying for a few years, a shorter-term loan may result in lower interest payments but could also ultimately lead to higher payments made over time.

Look into fees that come with refinancing such as application, appraisal, and origination fees – these can add up quickly. While potentially getting a lower rate is beneficial, make sure the savings outweigh any costs incurred.

Borrowers should also consider how they’ll use any money saved from refinancing; borrowing more may make sense if those funds will be put toward an improvement project on their home or the consolidation of high-interest debt. Be sure that whatever intentions are behind the refinancing that it won’t be too burdensome on budgeting – or else it’s not worth it.

A mortgage broker is an expert on all the subtleties that go hand-in-hand with refinancing. They can explain the process to you in simple terms, and advise you on a course of action that will help you put your best foot forward in 2023.

Best of all, mortgage brokers generally don’t charge you a cent, as they are paid by the lender when a loan is settled, so you can rest assured that a mortgage broker is acting in your best interests.

If you have any questions about refinancing, or about home loans, reach out to us today to have an obligation-free chat with one of our experienced home loan experts.

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