05 June 2020|6 minute read
Almost 70 per cent of Australian mortgage holders believe now is a good time to refinance their home loan, according to research commissioned by Australia’s leading mortgage broker, Aussie, in partnership with Lonergan.
CEO of Aussie James Symond said, “With COVID-19 placing households under pressure to meet their mortgage repayments, the RBA recently dropping the cash rate to a historical low of just 0.25% and increasingly competitive products and rates, mortgage holders recognise there are opportunities to get a better deal.
“Over the last month 42 per cent of appointments with an Aussie Broker related to refinancing, indicating that during uncertain times, there are options available and consumers want a broker to investigate if they have the right home loan for the current market conditions,” he added.
The research found 80 per cent of mortgage holders are confused about refinancing and 13 per cent say they do not know what refinancing is altogether. In addition, only 22 per cent are able to correctly identify examples of refinancing.
The research shows the most common error mortgage holders make when classifying refinancing is believing it is negotiating a lower repayment on their current home loan. Other common misconceptions about refinancing were that it included splitting their current home loan between fixed and variable or negotiating for temporary fixed payments with their current lender.
Almost half of respondents (44%) have not thought about refinancing and 1 in 4 have thought about it but have not looked into it yet. If they do refinance, 42 per cent of mortgage holders said they would be most likely to put the money they save into their offset account, and 35 per cent said they would save it for a rainy day or something specific.
In addition to the confusion, the research shows many are simply held back from refinancing for psychological reasons or complacency, such as not knowing where to start and feeling that the process seems too hard.
The research also shows that 83 per cent of mortgage holders identify key benefits of using a mortgage broker to refinance their home loan. Top benefits of using a mortgage broker as identified by mortgage holders include:
Yet, 46 per cent have taken information or advice on their current home loan from their own research, most commonly their current financial institutions website (29%), followed by other websites (20%).
Mr Symond said, “The benefit of using a mortgage broker is that they are a specialist in home loans, they can outline what’s involved, guide you through the steps in detail, they know what’s available on the market, and can assess what you’re eligible for. In short, they can help take the complexity and confusion out of the process.”
Melbourne parents of two young daughters, Lisa and Michael Ware, have owned a three-bedroom house in Rowville for 10 years and had a Principal and Interest mortgage of $500,000. The couple recently decided to take advantage of the current competitive market and approached their local Aussie Broker, Mr Michael Collins.
After detailed research and consultation, Mr Collins organised a refinancing of the couple’s mortgage achieving a rate of just 2.69 percent from 3.39 percent, and a cashback offer of $4,000. According to Lisa, “The savings will go a long way in helping to pay off our mortgage, and perhaps allow us to contemplate the purchase of an investment property down the track.”
Refinancing was made easier with the help of a broker, “…who did all the leg work for us and navigated the very complex range of deals out there to get us such a great deal.”
To illustrate how customers could save, Mr Symond said, “A customer’s mortgage payments, for example could be reduced by $2,530 per annum or $210 per month where they refinance from 3.19% to 2.19% on a $400,000 loan.”*
“If you’re a mortgage holder during this time it doesn’t hurt to chat to a broker and explore your options if you haven’t already,” he concluded.
The research was commissioned by Aussie and conducted by Lonergan Research between 14 April 2020 and 21 April 2020, and in accordance with the ISO 20252 standard. The study was conducted with over 1,000 mortgage holders to uncover their attitudes and knowledge regarding refinancing their home loan. After interviewing, data was weighted to the latest population estimates sourced from the Australian Bureau of Statistics.
Contact Caroline Raffan at Aussie on 0409 914 614