The uptrend in the cash rate is compelling many mortgage holders to refinance — some are able to get more bang for their buck by refinancing to a different lender.

One of the most significant findings from PEXA Insights’ Refinancer Sentiment Research is the average amount mortgage holders can save by refinancing their home loans.

The report, which conducted a survey between May to June, showed that 1.04 million Australians refinanced their home loans over the past 12 months. Savings among these refinancers were estimated to be $1,524 per year.

However, those who refinanced to a different lender were able to get an estimated annual saving of $1,908, significantly higher than the $384 annual savings of those who refinanced with their existing lender.

Around 55% of refinancers stayed with their existing lender and were able to secure a 0.1% savings on their interest rate.

Those who switched to a new lender were able to reduce their interest rate by around 0.5%.

Over the next two years, around 2.28 million Australians have plans or are considering refinancing their home loans.

PEXA Insights head of research Mike Gill said these results reflect that more Australian consumers are hinting out the most competitive interest rates, which led to record 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,” he said.

Furthermore, Mr Gill said the spike in refinancing confirms the level of uncertainty felt by mortgage holders.

“Around 71% are feeling 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,” he said.

Who are the typical refinancers?

Refinancing was more common among male borrowers, who comprised 61% of all refinancers.

Around 42% of refinancers fall under the 30-40 age bracket while 14% are in the 18-29 age group, and 28% are in their 40s-50s.

The most common household composition of refinancers is couples with children living at home at 67%.

In terms of employment, three in four refinancers are employed full-time.

Based on the report, homeowners refinanced their mortgage around 5.6 years after purchasing their property.

The average value of properties being refinanced was $732,000 and, in most cases, refinancing was for primary residences.

Three in five refinancers own only one property and on average, they had an average of $491,000 remaining on their home loan.

Around the same share of refinancers are first-time borrowers while over half already had prior refinancing experience.

Those who refinanced spend 34% of their household income on average for mortgage repayments.

How do borrowers refinance?

According to the study, borrowers spent six weeks researching about refinancing.

The most common sources of information about refinancing are mortgage brokers (41%) and home loan provider websites (41%).

Roughly 38% of borrowers rely on a general internet search while 36% depend on comparison websites.

On average, borrowers spent 3.4 weeks to complete the refinancing process. Those who refinanced with their existing lender only spent three weeks while those who looked for another provider took longer at 4.2 weeks.

Experienced refinancers were able to finish the process for 3.7 weeks while first-timers took four weeks on average to fully switch to a new loan.

What loan features do refinancers look for the most?

Refinancers consider around four loan features on average when they decide to switch their home loans. Aside from the interest rate, here are some most important features refinancers are looking for:

  • Ability to negotiate for a discounted rate
  • Ongoing fees (minimal or no fees)
  • Offset accounts
  • Cashback or sign-up bonuses
  • High likelihood of approval

Common reasons for refinancing

Roughly three in 10 borrowers cite wanting to get a more competitive interest rate as their reason for refinancing. Here are the other top motivations why borrowers refinanced:

  • Save money to improve financial position
  • Broker recommendations
  • Changing personal circumstances
  • Wanting to lock in a fixed rate
  • End of a fixed term
  • Anticipation of higher house prices

Top barriers to refinancing

Borrowers cited interest rate instability and the application process as the top barriers preventing them to refinance.

There are also those who are already satisfied with their current rates and the services of their existing lenders.

Meanwhile, there are also those who are unsure whether the current environment is appropriate for refinancing while some are not informed enough about the benefits of refinancing.

A small portion also believe that the potential savings from refinancing are not worth all the process involved.

Photo by 89Stocker on Canva.