You don’t need a fire under you to change your home loan? Find out what’s making refinancing hot, hot, hot!
- Everybody is doing it!: A recent survey from Bankwest / MFAA Home Finance Index has revealed that one in four have refinanced their mortgage in the past two years. Figures from AFG, the country’s largest mortgage broker echo this finding – the mortgage broker revealed 39.2% of all mortgages processed last month were for refinancing – a level not seen since December 2010.
- Exit fees are out: While the exit fee ban officially came into existence 1 July, many lenders anticipated its arrival by dropping these fees in the early part of 2011. Mortgage borrowers with loan agreements made prior to the ban will still be on the hook for existing loans, but some lenders have also offered to pay fees incurred by borrowers refinancing to their own financial institution in the interim.
- Banks are hungry: June mortgage data from AFG reveals that major banks increased their market share to 82.1% from 80.4% in the previous month. Driving that increase is the increased number of borrowers looking to take advantage of new offers. ANZ recently announced a $1000 offer towards the cost of switching your home loan to its Simplicity Plus or Breakfree Package mortgages. The offer includes a waiver on the application fee for Simplicity Plus, which saves customers $600, and a $375 waiver on the Breakfree Package fee (for the first year only).
ANZ also reduced rates on its Breakfree standard variable rate loan by 80bps and 15 bps on fixed rates until the end of September. CBA also cut rates on its recently launched “no fee” home loan – shaving it down from the already discounted rate of 7.24% to 7.11%. Meanwhile, NAB is continuing its “break-up” campaign – offering to pay fees incurred by borrowers if they make the switch and giving them a cheaper interest rate. It is also offering a competitive rate of 6.59% through its online banking business UBank for borrowers looking to refinance. The package comes without application or administration fees. Westpac has announced cuts to its fixed rates on Home and Investment Property Loan for two to 12 years. The two- and three-year fixed rate products will drop by 20 bps, while the four- to 12-year products have been cut by 10 bps.
While there are some great deals around, borrowers should think carefully before refinancing to another lender for a cheaper rate. Sometimes you can get just as sweet a deal by negotiating with your current lender. As well, rate is but one part of a good home loan – you’ve got to also consider loan features, repayments and accessibility. In addition, when setting up a new loan you could be looking at paying application fees, lenders mortgage insurance, registration fees and account fees.
Make a sound decision based on both your short and long term needs by going over costs, risks and benefits.