A recent national survey initiated by mortgage lender State Custodians revealed that most Aussie homeowners are struggling to refinance.
15% of the 1,022 respondents said were unsuccessful in refinancing as the value of their property had been reduced, while 29% believed their property has improved in value but still ended up with their homes untouched.
State Custodians General Manager Joanna Pretty said homeowners tend to believe that their property has increased in value.
“Declines in property value are influenced by what is happening in the market and the land value of the area,” she noted.
“But even if your home is in a good area, the valuation can still come back under expectation. Poor property presentation and upkeep can play a role in this. Unkempt yards, poor maintenance of key rooms, like kitchens and bathrooms, and unfinished renovation projects can all bring down a valuation.”
Pretty also added that some people could not accept the fact that the value of their homes did not increase or, worse, even decreased from the price they paid for when it was purchased.
Looking closely, the difficulty is felt mostly by the youngest people in the country. 41% of Australians with a mortgage said they have successfully refinanced their home loan and had no problem getting a better rate as the value of their property had increased. However, for people aged under 34, who accounted for 34% of the respondents, this was not the case. The under 34’s were most likely to say that they have been unsuccessful in re-financing due to dropping property values.
Pretty said that prices have been weakening across much of the country, especially in the major capital markets of Sydney and Melbourne. The softer market conditions are becoming a hurdle to refinancing.
“Anyone who has not yet built up a substantial amount of equity in property or whose property has fallen in value is more likely to be unsuccessful in seeking refinancing,” she said.
On the bright side, if you can get it approved, it now the great time for homeowners to refinance.
“Interest rates are currently at near record lows and, although increases are likely in the not-too-distant future, rates are still likely to be low relative to historical levels,” Pretty said.
“We always encourage borrowers to review their home loan every few years to ensure they are getting the best deal.”