Refinancing activity among Australian homeowners has continued the upwards trend it has charted since the COVID-19 pandemic, according to a slew of reports.
According to one such report from Credit Union Australia (CUA), there has been a 23% increase in refinancing applications since May.
Megan Keleher, chief customer officer at CUA, said that for around a quarter of refinancers, the decision to restructure was made to release equity for another major purchase such as buying a car. Around 18% said they will use the equity released to fund renovations or extensions to their house.
"Refinancing can be one way to potentially save thousands of dollars over the term of your loan, and with interest rates at record lows it may be a good time to consider refinancing. However, it is a big financial decision and you need to consider more than just the interest rate," Keleher said.
A study by PEXA also helped give firmer shape to the trend. Over the first nine months of the year, refinancing activity went up by 27%, driven by a combination of easing mortgage stress and borrowers shopping around in the low-rate environment.
The study highlighted a shift in the preference of borrowers when it comes to refinancing, finding that major banks have started to win back borrowers, outpacing non-major lenders in both new mortgages and refinances. Australia's big four entered a "net win" refinancing position in May, and started outperforming non-majors in terms of refinancing the following month.
"The non-majors had been steadily chipping away at the majors’ refinancing share for at least two years but that was lost with the advent of COVID-19. As is the case for new mortgages, the majors’ growth in refinancing share may be attributable to competitive offerings and responsiveness to market conditions throughout 2020," the study said.
In June, mortgage broker Aussie released a similar report, showing more than 70% of borrowers believe this year is a good time to refinance, with 80% of that group saying they need the guidance of a broker to navigate the process.
“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. In short, they can help take the complexity and confusion out of the process," said Aussie CEO James Symond.