State accounts for nearly half of all refinancing activity as borrowers try to find better deals amid rising rates
New South Wales has emerged as Australia’s refinancing capital as homeowners with skyrocketing mortgage repayments seek better deals from their banks rather than switch lenders.
According to data from online lending platform Lendi, $422.53 million worth of home loans in NSW have changed lenders since the start of the year, representing 49% of refinancing activity across the country, The Australian reported.
This compares to $163.28 million in loans for Queensland and $158.29 million for Victoria during the same period, each accounting for about a fifth of total activity nationally. South Australia posted a 5.6% share of refinancing activity, while Tasmania accounted for 2.1%, according to The Australian. Each of the territories posted less than 1% of national activity, while no data was provided for Western Australia.
Brad Cramb, Lendi Group’s general manager of distribution, said of those refinancing with the platform, only 49% are choosing to go with a big four bank, despite the big lenders’ cutthroat competition to lure new business with cashback and frequent-flyer offers.
“There has also been an increase in people looking to refinance with their existing lender,” Cramb told The Australian. “We’ve seen in the six months to February 2023 a 200% rise in same-lender finance. Those mortgage holders [achieve] an average saving through a broker-originated finance of 68 basis points (0.68%) on their loan.”
Data from the Australian Bureau of Statistics shows that refinancing has reached record highs, with the value of loans being refinanced hitting $18.6 billion in January.
Read next: More Aussie homeowners taking action to cushion rates impact – AMP
The refinancing surge is being driven by customers looking for savings amid a raft of Reserve Bank rate hikes. Last week, the central bank raised rates for the 10th consecutive time to 3.6%, the highest level since 2012.
Louis Christopher, managing director at SQM Research, told The Australian that he predicted the RBA would hike rates again next month, followed by a pause in May. Christopher warned it would be “crunch time” for borrowers as cost-of-living pressures increased.
“It will be extremely painful for many,” Christopher said.
Broker Kim Horan, principal of Aussie Home Loan St Mary’s, told The Australian that even refinancing was becoming more difficult. She said the current serviceability buffer of 3% is reducing homeowners’ borrowing capacity and making it more difficult to find a competitive rate.
“We’ve been able to assist some households in these situations by consolidating their liabilities, which can also help to relieve cashflow pressure,” she said.
The big four banks have all passed along the latest rate hike in full.
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