Aus mortgage switch surge hits 1084 loans a day

Aussie homeowners are fleeing their lenders in droves with new data revealing almost 100,000 mortgages were switched in the June quarter.

That’s the highest level of mortgage refinancing since September 2023, with an estimated 1084 loans switched every single day.

The surge in refinancing, highlighted in the ABS Lending Indicator data, follows recent interest rate cuts in February and May.

The cuts appear to have spurred borrowers into action, prompting them to review their current mortgage arrangements.

Since the Reserve Bank of Australia began its rate-hiking cycle in May 2022, a staggering 1.26 million mortgages have been refinanced, in seasonally adjusted terms.

The figure includes borrowers who have refinanced multiple times or hold multiple loans.

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Refinancing: How much can you save?

While the recent 0.75 percentage point reduction in the cash rate has provided some relief for variable home loan holders, refinancing could offer even greater savings.

According to Canstar.com.au, a borrower with a $600,000 loan and 25 years remaining could potentially save over $12,000 in the next two years by switching to a competitive interest rate of 5.25 per cent.

This calculation even factors in the estimated $1150 in costs associated with switching lenders.

Source: Canstar

Rate gap narrows as banks fight to retain customers

Data from the RBA indicates that the difference between the average existing owner-occupier variable interest rate and the average rate offered to new customers is now at its narrowest point on record.

This is largely attributed to borrowers actively refinancing or negotiating better deals with their existing banks.

In fact, the data shows that the average owner-occupier has successfully negotiated a reduction equivalent to 0.82 percentage points of the previous rate hikes over the past three years.

The gap peaked in October 2022, when the average owner-occupier variable rate across the market was 5.09 per cent, while new customers were being offered rates as low as 4.58 per cent – a difference of 0.51 percentage points.

Source: Canstar

Now, that gap has shrunk to a mere 0.04 percentage points, with the average owner-occupier paying 5.79 per cent compared to 5.75 per cent for new customers. This is the smallest difference recorded in recent RBA data.

Sally Tindall, Canstar.com.au’s data insights director, says the mass exodus of borrowers from substandard mortgage rates is a positive sign.

“Almost 100,000 mortgages switched lenders in the past three months – that’s more than 1,000 loans switching every single day,” she said.

“The RBA might have served up rate cuts, however, that hasn’t stopped tens of thousands of Australians from seeking out even better deals.

“As a result, we’ve gradually seen the average owner-occupier variable rate fall by a lot more than what the RBA has plated up, thanks to hordes of borrowers proactively switching lenders and haggling with their current bank for a better deal.

“The fact that the gap between the average and new customer variable rates for owner-occupiers has narrowed to basically nothing is testament to this.”

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Canstar.com.au’s data insights director Sally Tindall. Picture: Tim Hunter.

“However, there are still millions of borrowers who haven’t switched, Ms Tindall adds.

“After this latest cut filters through, we expect there will be over 30 different lenders offering at least one variable rate under 5.25 per cent,” she said.

“Switching to a rate around this mark could save a typical borrower with a $600,000 debt over $12,000 in the next two years, even after switch costs are factored in.

“That’s money some borrowers are blindly handing to their bank out of loyalty.”

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