With the major banks revising their home loan interest rates and adding and dropping loan products, it seems as if every homeowner is talking about refinancing their mortgage.
In fact, a report from JPMorgan Chase attributes much of the recent growth in the Australian mortgage market to the refinancing trend, with the number of borrowers choosing to refinance rising from 10% in 2015 to 35% in 2016. This is a remarkable increase, and one that signals a shift in how borrowers and lenders are interacting.
Borrowers are refinancing for various reasons, but many are prompted by rising interest rates. In late 2016, increases by the Federal Reserve in the United States led many banks, including Westpac and National Australia Bank, to increase their rates. Rate hikes were also triggered by a surge in bond yields and wild fluctuations in the commodity and currency markets, which had the effect of pushing up the cost of funding for local lenders.
Another reason for the surge in refinancing is necessity. Median house prices in many property markets are rising, and in some areas (like the southeastern capitals), house price growth has entered the stratosphere. This has placed a heavy burden on prospective homeowners, who have to take out huge loans in order to buy property. In such scenarios, refinancing after a few years is a great way to lower rates and reduce repayments.
The refinancing trend to continue into 2017
Experts, such as Will Foster, director of Foster Finance, are convinced that refinancing will continue to drive growth in the mortgage market in 2017. The driving force behind this surge, he believes, is savvier consumers.
More borrowers are aware of how the market works and are seeking better options. Many are also dissatisfied with the terms and customer service from their original lenders.
In response, both banks and non-bank lenders are offering better deals. As refinancing constitutes a sizeable chunk of the mortgage market, in order for lenders to secure their market share, they have to attract borrowers who have a better financial education. This has led to more competitive refinancing options for Aussie borrowers.
The average borrower is more aware of interest-rate changes and how regulatory bodies and government policies influence lending terms. They’re also more likely to respond to hikes and forecasted rate increases with refinancing.
If you’re thinking of refinancing your mortgage this year, keep in mind that you may be able to get a better deal if you shop around. Compare the different home loans to see what rates and features you may be able to get when you refinance.
Remember: it isn’t just the smaller lenders that are becoming more competitive, as the bigger banks and their subsidiaries are also repricing this year. Take advantage of existing options and you could improve your financial situation.
Collections: Mortgage News
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