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Despite most borrowers saying they are not confident that they have a good home loan deal, they have not sought to refinance, a survey has found.
New research commissioned by major brokerage Aussie has revealed a “refinancing reluctance” and a disconnect between borrowers’ understanding of the opportunity offered by refinancing and their willingness to take action despite record-low interest rates.
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The research has found that 60 per cent of borrowers have not reviewed their home loan in the last 12 months or since securing their loan, while only 20 per cent have acted and refinanced their mortgage during that time.
This is despite six in 10 borrowers stating that they are not confident that they currently have a good deal, 62 per cent saying that they understand the importance of refinancing their home loan on a regulator basis, and 53 per cent saying that they believe that now is a good time to refinance.
Furthermore, the research – based on a survey of 1,003 Australians aged 18 and over who have a home loan – found that over half (54 per cent) of borrowers have never refinanced their current home loan.
Some of the reasons stated for why borrowers are not refinancing include believing it is too hard or being unsure where to begin the process (22 per cent), not believing they can get a better deal (18 per cent), or concerns about ending up worse off or paying more money (24 per cent).
Commenting on the research, David Hyman, the CEO of Lendi Group (parent company of Aussie and Lendi) said that there are around 6 million outstanding mortgages in Australia but fewer than 450,000 of those have been refinanced in the last financial year despite record-low interest rates, and called the gap staggering.
He said: “With three-quarters of Australia in lockdown, we understand that refinancing may not be top of mind right now, but by not setting aside a small amount of time to look at their home loan, Australian mortgage-holders could be missing out on thousands in savings, which could be really helpful for many families.”
Mr Hyman said that the low levels of refinancing could partly be attributed to a knowledge gap around what is involved in the process.
However, he noted that bridging this gap “with the help of an expert is not hard”.
“It’s good to remember that reviewing your loan doesn’t always mean refinancing, and you may not even need to change lenders to get a better rate,” Mr Hyman said.
“It’s important to take the first step and speak to an expert who can advise. A mortgage broker can help you understand how your current home loan compares with the market and, in some instances, help you negotiate a better rate with your existing lender.”
He concluded: “It’s important that Australians understand that reviewing a home loan does not have to mean that you will end up worse off.”
According to Lendi Group data, borrowers who refinance could save around $2,000 per annum by dropping less than 1 per cent in their interest rate.
Lendi customer data showed that between 1 May and 31 July 2021, on average, customers were saving $1,988 when refinancing by 81 bps.
[Related: 48% of home loan applicants frustrated by paperwork]
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