Recent movements in interest rates have led home loan refinancing to be one of the hottest topics in financial, political and general media circles and around the BBQ. Our Product Manager, David Bryde, talks about what motivates borrowers to refinance and how too many Australians are throwing away thousands of dollars of their hard-earned money by not switching from the big banks.
The following chart shows the average value of loans the Greater has refinanced per month over the last seven years. Coupled with the economic factors that have been prevalent over this period, it provides a good insight into borrower behaviour.
In my experience borrowers usually wait for an event or “trigger” to encourage them to refinance their mortgage. Most commonly this is a need to borrow extra funds, to consolidate other debts or a bad experience with their current lender. If they need to go through the process of applying for extra funds with their existing lender, it is often just as easy to go through it with a new lender.
The height of the property boom in 2004 was also the height of the refinancing boom. As property prices increased many people found themself with new-found equity in their home that they could borrow against. The home improvement craze also took off and provided many with a trigger to borrow more and move their mortgage.
The GFC (2008 to 2010 in the graph) put a dampener on consumer confidence and raised questions about future financial security for many. Although interest rates dropped to record lows, uncertainty about the future prompted borrowers to focus on reducing debt rather than increasing it. Whenever uncertainty exists, the natural reaction for many is to sit tight and stay put rather than risk any adverse consequences of making a change.
When the major banks increased interest rates over and above the Reserve Bank’s movement on Melbourne Cup Day 2010 it was a landmark day for refinancing activity at the Greater. When the Greater only passed on the official increase it opened up a yawning gap between our interest rates and those of the majors and, on the back of the backlash against the “Big 4”, it was a significant trigger for borrowers to refinance with us and save money on their loan.
That gap between our interest rates and those of the major banks still exists with the Greater’s standard variable home loan rate of 6.90% still around 0.50% cheaper than the average of the major banks.
As the following table shows, many Australians could be in a much healthier financial position if they were to refinance their home loan with a lender like the Greater.
Among all the reasons that motivate people to refinance, saving money should be the most compelling.
If your mortgage is with a major bank we have the weapon to save you money, you just need to pull the trigger.
Our staff can help you switch. It is easier than you think.