A Sydney mortgage broker says she is loving the surge in the number of her clients refinancing their home loans.
Marina Michael (pictured above), owner and head finance broker of Elending Finance, said she enjoyed educating her clients about the benefits of refinancing their home loans and how and why their mortgage was structured.
“The post settlement client experience is so important and I would prefer managing a client who is refinancing rather than a new client as I do not have to stress about loyalty tax,” Michael said.
“I have a great onshore processing team which allows me to spend more time on the front end of my business. By knowing our inhouse turnaround time keeps us accountable and managing our clients’ expectations.”
Michael said when it came to some lenders offering incentives to refinance and lure in new clients, loyalty tax was a massive issue as banks were charging approximately $70,000 for the average mortgage over the lifetime of the loan.
“Because banks are reaping these rewards, they will not call and say ‘I can save you all this money’ as they depend on clients either being lazy with their home loan or thinking being loyal to my bank will help me in the long run,” she said.
“I have been loving the incentives lenders are offering as it boosts competition amongst banks. At the end of the day, I don’t want my client to proceed with the wrong bank who might be offering a benefit such as instant cashback but have a higher interest rate or wrong loan structure, which will cost my client much more in the long term.”
On January 13, the Australian Bureau of Statistics reported home loan refinancing levels reached a record high of 9.1%, with an increase of $13.4bn in November 2022. Meanwhile, total new loan commitments for housing fell 3.7%.
Michael said brokers should inform their clients that a cashback offer might not be the strongest incentive when refinancing their home loan.
“Although cashback might be a good thing now, last year we saw timelines from banks draw out massively as they introduced them which got a lot of people offside,” she said. “As brokers, we also need to spend time learning different lenders products as each bank has a different refinance application process.”
Michael said she had seen an influx in investors refinancing in recent months for two reasons.
“Many investors who have purchased in recent years are encouraged to refinance and access the newfound equity in the value of their investment properties to use or buy another property,” she said.
“With higher home values brings higher rental returns, so investors are also loving this jump in property prices across the country.”
Brisbane mortgage broker Tom Uhlich, who owns brokerage Boss Money, said there was slight panic in the market with many wanting to refinance to “low” fixed rates that no longer existed.
“We have also seen a segment that are refinancing for cash out to hold as a buffer for the rocky road ahead (which is a strange concept), getting cash-out at higher rates to help cope with higher rates,” Uhlich said.
“Since late 2022, we contacted our clients and had them work out their repayments at 6%. Then we suggested they set up a separate account and pay in the difference between their low fixed rate and 6%, so that way they are training themselves to make repayments at the higher rate.”