Rate cut-fuelled refinancing spike sparks lender wars

Fierce competition between home loan lenders to lock in borrowers on new deals is set to get another boost after the August rate cut.

While the latest cash rate cut has only just been announced, relief handed down by the Reserve Bank in February and May this year has already seen borrowers willing to hunt for new home loan deals.

New Mortgage Choice data has revealed there was a 22% spike in the amount of borrowers refinancing their home loans during the June quarter directly following the two cuts.

The latest Mortgage Choice Home Loan Report found while the value of loans for refinance was up over 22% year-on-year, South Australian and Northern Territory borrowers led the pack – recording the highest annual growth in the value of refinance loans, up 28% year-on-year. 

Compiled from home loan submission data from Mortgage Choice and a nationally representative survey of 1000 consumers, the report highlighted home loan trends, in addition to the intentions of Australian borrowers and prospective buyers.

Mortgage Choice chief executive Anthony Waldron said the Reserve Bank’s second cut to the cash rate during the June quarter spurred borrowers to meet with their mortgage broker to review their home loans.

“Findings in the data show 72% of homeowners review their home loan at least once a year, up from 59% a year ago,” he added.

The survey also uncovered mortgage holders’ motivation behind their most recent home loan review and found that nearly half (49%) of respondents wanted to lock in a low rate from lenders.

Consolidating debt came in second at 11%, followed by to increase or reduce my loan term at 10%, and locking in a fixed rate or switching from fixed to variable (or vice versa) was also the reason cited by 10% of respondents.  

A total 10% of respondents also said their reason for refinancing was to be able to access home loan features such as an offset account, or redraw facility.

Many lenders, including the big four banks, have already passed on this month’s rate cut to borrowers. Some will feel the benefit immediately while others may have to wait until September for the change to flow through. 

The next cash rate decision will come on 29 September.  

This article first appeared on Mortgage Choice and has been republished with permission.

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