Record low interest rates have failed to entice many new borrowers to the property market and existing borrowers are largely uninterested in refinancing their home loans, according to financial comparison website RateCity.
While rate reductions haven’t slowed down this month off the back of May’s RBA rate cut, including all four majors, RateCity spokesperson, Michelle Hutchison, says borrower demand remains weak.
“Despite efforts from lenders and the Reserve Bank, Australia’s home loan market activity is still not at the level it was before the GFC. From 2001 to 2009, there were 55,000 home loans written each month on average. For the four years following, there have been less than 50,000 home loans written in any given month.”
Hutchison says this shows consumer confidence hasn’t returned to pre-GFC levels and that it will take ‘more than a single rate change’ to entice borrowers back into the home loan market.
Despite April’s ABS figures showing a 5% rise compared to the previous month and 17% higher than April 2012, the number of home loans financed has remained flat for the past three years, generally sitting between 40,000 and 50,000 per month.
There was a 12% uplift in borrowers fixing their home loan, with 21% of loans fixed in April compared with 18% in March. It was also the highest proportion of borrowers fixing their home loan in five years, though not as high as in 2007 when over 25% of home loans were fixed.
“While interest rates are at the lowest levels we’ve ever seen, lenders may need to start offering better incentives for borrowers to attract them to the home loan market, such as reducing upfront fees or promotions to refinance,” says Hutchison.
“Many borrowers become complacent with lower interest rates, which is why only 32% of all loans financed in April were from borrowers switching lenders–a smaller proportion than most months of the past few years.”