While the commanding majority (70%) of Australian mortgage holders believe now is a good time to refinance, 80% of the same group has communicated they are confused about what that process entails.
Research commissioned by mortgage broker Aussie has revealed the gap in borrower knowledge and highlighted brokers' role in providing the necessary guidance.
“With COVID-19 placing households under pressure to meet their mortgage repayments, the RBA recently dropping the cash rate to a historical low of just 0.25% and increasingly competitive products and rates, mortgage holders recognise there are opportunities to get a better deal,” explained Aussie CEO James Symond.
“Over the last month, 42% of appointments with an Aussie broker related to refinancing, indicating that during uncertain times, there are options available and consumers want a broker to investigate if they have the right home loan for the current market conditions.”
Of those surveyed, 13% communicated they do not know what refinancing is altogether, with the most common misconception being that it's negotiating a lower repayment on one's current home loan.
Others erroneously believe refinancing involves splitting their current home loan between fixed and variable or negotiating for temporary fixed payments with their current lender.
According to the research, confusion isn't the only deterrent keeping mortgage holders from refinancing; many others are held back for psychological reasons, such as not knowing where to start or feeling the process seems too hard.
The top benefits of using a mortgage broker, as identified by the polled home loan holders, included their ability to find a good rate (52%), helping borrowers understand their options (45%), knowing how to get a good deal (43%) and completing the paperwork (42%).
However, even with the widespread acknowledgement of brokers’ expertise, 46% of the borrowers have relied on their own research to inform their home loan decisions in the past, most commonly relying on their current financial institution’s website.
“The benefit of using a mortgage broker is that they are a specialist in home loans, they can outline what’s involved, guide you through the steps in detail, they know what’s available on the market, and can assess what you’re eligible for,” said Symond.
“In short, they can help take the complexity and confusion out of the process," he concluded.