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Record low interest rates have been one of the few positives that have come out of the pandemic for Australian consumers over the past 12 months, however, recent research by Mortgage Choice has revealed that more than half of mortgage holders don’t even know what their current home loan rate is. According to CEO Susan Mitchell, the opportunities for brokers are immense as market conditions point towards a refinancing boom.
According to the report, only 46.5% of respondents knew what their rate was as of October 2020. This was substantially less than borrowers in previous years, with 61.5% knowing their rate in 2018 and 71% in 2016.
Mitchell said this increase in interest rate apathy didn’t seem to make sense – especially since more than 60% of respondents said COVID-19 had caused them to worry more about money.
“I can only imagine that people are starting with some smaller, easier things,” she said. “People are very much focused on saving more, spending less – and maybe they see it as very difficult to go and refinance your mortgage as opposed to changing your electricity or reducing your food bill.”
She added that she can understand why some borrowers may think the refinance process is too difficult or complicated to attempt given everything that has been written about it over the past few years, however, since the savings could be substantial, it would be great to see more people grit their teeth and speak with their broker or lender about their options.
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This increase in rate apathy seems at odds with what brokers are predicting in terms of loan activity in 2021. A recent report by Resimac revealed that about 40% of the 12,000 brokers surveyed expected refinancing to drive most new home loan activity this year.
Resimac’s general manager of distribution Daniel Carde said the views of its broker network mirrored the market intelligence he had seen for 2021.
“Refinancing activity helped to keep the mortgage market active throughout last year, and we expect to see continued growth in this space throughout 2021, particularly from those who are currently still in the process of getting back on their feet after the initial lockdown,” he said.
Mitchell said refinancing peaked at 50-55% of Mortgage Choice’s activity in May last year before falling back again, possibly due to speculation around rates dropping further. She said now is the perfect time to refinance given fixed rates are well below 2% at many lenders.
“There’s a couple of things going on that make this a refinance boom,” she said. “First of all, you’ve got historic low rates, great low fixed rates – as well as you’ve got cashback offers from some of the banks that actually will cover some of the costs of the refinance. So, it’s a great time to look at it.”
She agreed that interest rate apathy, coupled with low fixed rates, provides huge potential for brokers to tap into the refinance market with their customers throughout 2021.
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“There’s so much information out there,” she said. “As simple as some of those rates seem when you research on the internet, it’s actually quite complicated when you go to the next level because it very much depends on your specific circumstances.
“There’s 15-30 different things that could cause your answer to be different to what you actually see on the internet and you really need a broker to help you get through that.”
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