Laura Akhurst - 3 May, 2016

What’s Driving the Refinancing Boom?

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The Australian mortgage market is experiencing a number of large changes. These changes are driving what many are referring to as a refinancing boom.

Australian Mortgage Market Changes

There are a vast number of changes occurring in the mortgage market. Apart from the official cash rate being at historic lows, regulation changes are also being put into place where lending criteria have been tightened. This has resulted in banks making independent rate rises to both owner-occupier home loans and investment loans.

Other changes that have been noted are the rise in the number of cashed-up baby-boomers looking to downsize. Along with the rise of reverse-mortgages where Australia’s ageing population are seeking to gain access to their equity in retirement.

All of these changes are making Australians consider their financing options in greater detail. They are also more aware of what represents value for money and how they can save more. Mortgage brokers are also said to be encouraging more home loan holders to consider their options, especially if they have a sound financial history and are a low-risk borrower.

The Refinancing Boom

According to financial experts, the number of home loan customers that are looking to refinance has taken-over the number who are seeking to take out new loans. Some brokers are reporting that 20 to 30% of their existing owner-occupier home loan holders are looking for better mortgage deals. This is compared to 20 to 25% who are seeking to find a loan.

According to the Australian Bureau of Statistics (ABS), during December 2015 and January 2016, the share of owner-occupier home loan approvals hit 36% for refinancing, breaking previous records, which hovered around 32%. In fact, the number of refinancing approvals in January 2016 was 22% higher than in January 2015.

Why has a Boom in Refinancing Occurred?

The refinancing boom is attributed to the independent interest rate hikes that banks have made. Financial experts are also predicting that banks will continue to make these rate rises. This has lead to what can only be described as ‘ferocious’ competition amongst lenders.

While the major banks are raising rates, smaller lenders are offering lower rates and a number of other incentives to owner-occupiers. So for home loan holders who are willing to shop around, there are a number of ‘money saving’ deals to be had.

Stale Home Loans

Many owner-occupier loan holders have old mortgages with ‘stale pricing’. This is because many home loan holders typically have a ‘set and forget’ mindset. So rather than reviewing their mortgage every 2-years to make sure it’s competitive, they simply leave it until it’s time to sell and buy a new home.

However, there are many different offers that are now available, especially if you have a higher loan-to-value ratio and have more equity in your property. Home loan holders with larger loans may also have more leverage.


Brokers and Refinancing

According to a recent survey conducted by JP Morgan, some 75% of owner-occupiers seeking to refinance used a brokerage service. This is attributed to the fact that mortgage brokers are able to compare different lenders and the home loan products that they offer. Banks and other lenders, on the other hand, can only offer a potential borrower their own products.

eChoice mortgage brokers have access to 100s of home loan products which are provided by more than 25 different lenders. So if you’re looking to review your existing mortgage and to compare this to other home loans on the market, then an eChoice broker can help you.

Mortgage brokers who are a part of the eChoice network use state-of-the-art technology to review and compare home loans. They take your own personal and financial needs into consideration, and they tailor a package to suit these requirements.

An eChoice broker will work with you, guide you through the process of refinancing, and will be there from the start to the finish of the refinancing process. They’ll also be your point of contact when you wish to review your mortgage in the future.

Do you want to know more about refinancing? Then contact eChoice today.

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