Article by Dan Gold
Incentivised by fixed home loan rates as low as 2.19 per cent, cash incentives of up to $4,000 (or $2,000 per property), and even 120,000 free Qantas points with certain credit cards, borrowers are refinancing their mortgages in record numbers.
$11.5 billion of lending was refinanced in March 2020, the highest figure since December and an 8 per cent increase from February. [1]
High-frequency data collected weekly by CoreLogic also shows that at the end of April refinancing accounted for 72.7 per cent of all mortgage commitments. [2]
These figures are consistent with what we’ve seen at Long Property. Refinances typically make up less than 50 per cent of our lending however they were 55 per cent in April and they’re projected to be 72 per cent and 76 per cent in May and June respectively.
The bulk of refinances have also been via the major banks. With rates falling there has been intense competition to build market share and the major banks have led the way (this is a reversal form what we saw during the banking royal commission, when the major banks were under more scrutiny).
The large cash incentives to refinance have been pushed harder by the majors and the interest rate differential between the major banks versus the non-major banks has narrowed as well.
Given the five RBA rate cuts since June 2019 there are likely to be serious savings now available for anyone who hasn’t reviewed their lending even just in the last six months.
This has all come at a good time for borrowers many of whom have managed to lock in good valuations on their properties prior to potential C19 related headwinds, and it has allowed them to either release equity or improve cash flow during this period of uncertainty.
Credit policies are starting to tighten now though and we anticipate that when ANZ’s $4000 cash back offer ends at the end of this month (end of May 2020) refinancing activity should moderate again.
If you would like to discuss what refinancing opportunities may be available for you personally please book in a 15 minute phone call or a 30 minute Zoom with me via this link – www.calendly.com/dangold (it takes less than 30 seconds to book and a calendar invite will automatically get sent to both of us)
Please note for the ANZ offer applications have to be in by Friday week (29 May), so we really have this week only to work up strategies and start preparing for potential applications.
References:
[1] Australian Financial Review, Record number of property borrowers refinancing, Duncan Hughes, 15/5/2020
[2] Australian Financial Review, Buyers growing more cautious on home purchases, Nila Sweeney, 5/5/2020
Long Property blog content provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Nothing on the Long Property website constitutes legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
