Borrowers are leaping at the chance that the Reserve Bank will cut its cash rate this year, with more of them looking for better home loan deals.
Home loan refinancing rose to a three year high of 37.5 per cent of all home loans in December, from 33.5 per cent in September, according to the Australian Finance Group (AFG), Australia’s largest mortgage broker.
This comes after some economists, including those from Westpac, NAB and AMP, changed their forecasts to include two rate cuts from the RBA this year after very weak economic growth figures were released in early December. Consequently the proportion of borrowers looking to fix their home loans has fallen significantly, to 14.5 per cent in December from 17.1 per cent the month before.
Meanwhile, the number of introductory home loans issued, which are designed to get borrowers to change lenders, rose to 5.8 per cent in December from 4.9 per cent in November. AFG’s general manager of sales and operations Mark Hewitt said competition among the lenders is increasing, with many offering better rates than those advertised.
He said that borrowers who are a particularly attractive catch for lenders can often get an “under the table” discount. “The main competition has been in that area rather than the advertised discounts,” he said. “The banks are typically looking for larger loans, over $500,000 for people with good equity in their properties and in stable well paid jobs.
“That’s the kind of customer most lenders are trying to attract, rather than the first home owner.” Mr Hewitt is not surprised that so many home owners are having another look at their mortgages after the changes in forecasts and considering the time of year. “Normally when there’s that kind of speculation, either rates going up or rates going down, it gets people reviewing their situation,” he said.
“Typically over Christmas a lot of people sit down and have a look at what their doing with their mortgage, what their doing with their superannuation and make a few new year’s resolutions.”