Lockdown or not, there has been a flurry of mortgage activity over winter, with the ABS (Australian Bureau of Statistics) reporting all-time highs in some mortgage lending and especially in mortgage refinancing.
It reported that in July 2021 in seasonally adjusted terms, the value of external refinancing for total housing rose 6.0% to reach an all-time high of $17.2b.
New loan commitments are 58% higher than a year ago and a whopping 64% higher than pre-COVID levels in February 2020. In addition, approved mortgages to investors continue to rise. The ABS reports the increase in investment loans as the biggest since the “all-time high in April 2015.”
While you might expect that figures would decline somewhat due to lockdown, NSW and Victoria saw gains, with NSW rising 7% for owner-occupied mortgages and Victoria increasing 0.4%. However, lenders reported some of the gains might have come from May/June loan applications. The NT saw double-digit growth with a 13% rise while the states experiencing the least COVID disruption also experienced falls in owner-occupied mortgages, with QLD down 6%; WA down 0.7%; SA dropped by 8%. ACT also fell by 5%.
We find it interesting that the activity seems to have been driven by the COVID impacted states.
However, I think they are on the right track. There has never been a better time to refinance your home loan. Interest rates are at bargain-basement lows. Some fixed rates are as low as 1.79 per cent p.a, with introductory rates on some variable rates also available at under 2 per cent. Because lenders have trimmed the fat on their fixed-rate loans, but are keen for a slice of the refinancing pie, we see those variable rates drop too.
In fact, the competition is so fierce for refinancing customers that many lenders are offering very generous cashback bonuses between $3,000 and $5,000 as well. Not bad, considering the savings you can already make just by refinancing.
The short answer is yes. Rates are at an all-time low, and lenders are pulling out all stops to get your business.
If you haven’t refinanced your loan or have had your mortgage for three years or more, and you continue to have a steady source of approved income (that means salaried or paid work rather than government stimulus), then it’s worth seeing what savings are out there.
You can go directly to your lender and ask them to cut your rate. If you don’t ask, you don’t know, as they say, and there’s a good chance they will be receptive at such a competitive time. If they don’t or wont budge on your rate, speak to your broker, as they can help with the process, create some competitive tension, or simply give you some thoughts why your lender may have said ‘no’ . They can also recommend a strategy on when it’s best to make the next approach.
But to really ensure you are getting the best possible rate (and hopefully a nice cash bonus), speak to a mortgage broker. The benefit is they have a wide panel of lenders to choose from and can help you identify the best options for you, find the best rate, plus any additional features you might need such as redraw and credit card facilities.
For example, using the Oxygen Switching Calculator by refinancing a $500,000 mortgage from a “Big 4” bank, currently at 3.89% to a mortgage at 2.49% with a well known non-Big 4 bank, you could save approximately $350 per month and more than $4,000 per year. And if you manage to get a cashback of $3,000 and plough it straight back into your loan, you also shave even more money off your loan.
If you haven’t refinanced for more than three years and still have a steady source of income, now is the time to look for a better deal.