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Analysis by Aussie has shown that many mortgage holders are not interested or do not know if they want to refinance their home loan or are unaware of their current rate.
New findings from the major brokerage (which is owned by parent company Lendi Group) have found that 57 per cent of borrowers said they are currently not interested in or do not know if they want to refinance their home loan.
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Over a quarter (28 per cent) admitted that they are unaware of their current rate.
According to the Australian Bureau of Statistics’ (ABS) lending indicators data, the value of external refinancing for total housing rose 3.2 per cent to a record high of $17.8 billion in August 2021, driven by an 11.5 per cent in investor housing (while refinancing for owner-occupier housing fell by 1.0 per cent).
Data from property exchange settlements platform PEXA showed that refinances reached record highs during August 2021.
However, Aussie’s analysis of ABS data from June 2021 showed that only 7.0 per cent of home loans were refinanced in the last year.
With many lenders lifting their fixed interest rates despite the Reserve Bank of Australia (RBA) continuing to hold the official cash rate at 0.10 per cent, Lendi Group chief executive David Hyman warned that continued complacency could mean that millions of mortgage holders are unable to “future proof” their home loan against further rate rises if they fail to lock in a low fixed rate while they are able to do so.
He said: “Our lender data shows that although the official cash rate has not moved since November 2020, within that same period we have seen over 1,000 rate changes and fluctuations across home loans, including a growing number of lenders increasing their fixed rates in recent times.
“It seems a majority of Australian mortgage holders have been gaining a false sense of security, every time the RBA cash rate stays steady – failing to realise lenders have no obligation to adhere to this when setting their rates. All of the talk is about the cash rate not rising for some time to come, but in reality, the steadiness of the cash rate does not prevent lenders from increasing interest rates.”
Furthermore, Mr Hyman warned that the current lack of action by mortgage holders could cost them in the future when they realise that low rates are no longer on offer.
“History dictates that interest rates will not stay this low forever, and mortgage holders need to start preparing for this,” Mr Hyman continued.
“The recent rates are as good as we’re likely to see for some time, while we’ve already [started] to see an uptick in fixed rates by some lenders.
“Homeowners need to understand that if they remain complacent and simply rely on the RBA rate announcements as an indicator, they are likely to find they have missed the moment when it comes to making the most of the current lending conditions and highly competitive fixed interest rates.”
Previous research released by Aussie has also highlighted the reluctance to refinance, with a recent survey finding 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 during that period.
However, Sherlok CEO Adam Grocke recently predicted that refinancing activity would increase over the next 12 to 24 months due to three factors.
These include a cooling of the real estate market from its current peak, movement of interest rates (which he said typically leads to increases in refinancing), and the introduction of new technology to automate refinancing.
[Related: Majority of brokers believe rate is top attraction]
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