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More borrowers are refinancing their mortgages now that rates have started to drop, with lenders offering increasingly competitive rates.
Demand is growing from borrowers looking for better home loan rates, following the Reserve Bank of Australia’s (RBA) decision to cut the cash rate in February 2024 – the first rate reduction in four years.
Major bank Westpac is the latest company to have reported a sharp rise in the number of people refinancing their mortgage, with a 45 per cent increase in people refinancing their home loan to the bank over the past quarter.
That came after the lender’s latest Home Ownership Report revealed that 30 per cent of home owners were considering refinancing in the December quarter.
Indeed, figures from the Australian Bureau of Statistics (ABS) showed that the total number of home loans refinanced between lenders in the December quarter was 61,749, a rise of 12.0 per cent compared to the previous quarter and up 1.5 per cent on a year earlier.
The surge in refinancing and home loan activity has been broadly anticipated, with the Finance Brokers Association of Australia (FBAA) revealing research last month that said more than half of mortgagors plan to refinance in the next two years to take advantage of lower interest rates.
As borrowers seek out cheaper interest rates, the use of technology in helping borrowers refinance has been of growing importance.
Westpac’s research revealed that 79 per cent of Australians with a mortgage think the home loan application process needs to catch up to the digital age and 82 per cent of current and past refinancers said the process should be more digital and less time-consuming.
The major bank has now launched a direct-only refinancing offer for those accessing mortgages online (via the Westpac website or banking app), which offers a rate of 5.84 per annum for owner-occupier refinancers with up to a 70 per cent loan-to-value ratio (LVR).
“With cost of living remaining top of mind for many Australians, savvy refinancers are making the most of the competitive mortgage market and shopping around for a better deal,” said Westpac managing director of mortgages, James Hutton.
“We expect our refreshed offer, coupled with the convenience of refinancing online, will appeal to both owner occupiers and investors looking for a fast and simple way to achieve greater savings on their existing home loan.
“While our Online Home Loan offer is available direct to refinancers online, many customers will still choose to go to a lender or broker for their expertise and face-to-face support.”
More brokers are also turning to technology and using loan pricing tools to ensure clients are on competitive rates and identify those who may benefit from being refinanced.
Lenders have been working to digitise the mortgage process, with a new report from NextGen detailing how lenders are digitalising the banking process and harnessing artificial intelligence (AI).
While many banks claim to have passed on the 25-basis point cut to borrowers already, some broker clients may still be sitting on interest rates that are higher than necessary, particularly as some lenders have chosen not to pass on lower rates to customers.
As well as growing volumes of refinancing, brokers have also reported a surge in pre-approvals, as more borrowers seek to enter the property market and take advantage of falling rates.
[Related: Expected surge in refinancings could unlock broker opportunities]
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