Refinancing

While the value of new loans dipped this month, refinancing has skyrocketed to an all-time high in June.

Latest figures from the ABS show the total value of refinanced loans hit $16.24 billion in June, up $1.37 billion in just one month, in seasonally adjusted terms.

That $16.24 billion figure is made up of a record&nbsp;$10.84 billion&nbsp;from owner occupier&#39;s refinancing, up 112% on a year ago, and&nbsp;$5.41 billion from investors, up 67% year on year.

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Refinancing has risen sharply in recent months, fuelled by record low rates. COVID has also prompted many families overhaul their finances.

In the past 12 months, $151.12 billion worth of mortgages have been refinanced, in seasonally adjusted terms.

RateCity.com.au research director, Sally Tindall, said the record high in refinancing in June suggested mortgage holders were racing to lock in low rates in case they rise.

&ldquo;At the start of COVID, we saw a spike in refinancing as people rushed to lock in a competitive rate. COVID was a wake-up call for people to get their finances in order, and banks were at the ready, handing out some of the lowest rates in history,&rdquo; she said.

&ldquo;Over a year later and we&rsquo;ve now hit a new record high, although this time, the surge is more likely to be fuelled by a fear of missing out.&quot;

&ldquo;In the last five months, dozens of lenders, including the big four banks, have hiked many of their longer-term fixed rates. Taking these record-low fixed rates off the table has been the push some people needed to refinance,&quot; she added.

The latest figures from the ABS show the total value of refinanced loans hit $16.24 billion in June, a new record high

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Mortgage refinancing is hitting record highs: RateCity

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The lowest home loan rate in the market has dropped to 1.69 percent at the Greater Bank.

It announced the new market leading rate of 1.69 percent following a cut of 0.20 percent to its 1 year fixed rate for owner occupiers paying principal and interest. 

Canstar editor-at-large and money expert, Effie Zahos says chasing a low rate should be on every homeowners’ radar.

“Interest rates will remain at rock bottom for the next three years, though fixed rates are likely to rise before variable rates do as the longer term bond market starts to anticipate monetary tightening a few years ahead,” Zahos said..

“The move from Greater Bank proves competition is still rampant in the home lending space,” she said. 

UBank is at 1.75 percent followed by Homestar at 1.75 percent.

Ratecity noted Greater Bank borrowers will need to shop around or refix their rate after the first year as the loan reverts to a variable rate of 3.66 per cent. 

Greater Bank home loans are only available for borrowers in NSW, ACT and Queensland. 

RateCity.com.au analysis shows if an owner-occupier with a $400,000 home loan switched from the average existing owner-occupier rate of 3.05 per cent, to this new rate from Greater Bank, they could potentially save $5,039 in the first year, including refinancing costs. 

However, after five years borrowers could be $3,849 worse off, unless they switch or refix their loan.

<img alt="" height="492" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/ratecity_cheapest_home_loan.jpg" width="604">

Notes: based on an owner occupier paying principal and interest, switching loans 5 years in to a 30 year home loan with a balance of $400K. Assumes the customer does not refix / refinance after the 1 year fixed rate expires. Refinancing costs include discharge fees but not government fees.

RateCity.com.au data shows 24 lenders have cut 317 home loan rates since 1 January.
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Canstar editor-at-large and money expert, Effie Zahos says chasing a low rate should be on every homeowners’ radar.

jchancellor

Home loan rate hits new record low of 1.69%

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EXPERT OBSERVER
There was an explosion in refinancing in May 2020, taking total lending to owner-occupiers up to record monthly highs.
<div>This will effectively act as a rate cut (or perhaps two) for many of these borrowers.</div>
<div> </div>
<div>But once you strip out the massive surge of 21,227 refinancing approvals there was the expected decline in housing lending, as the economy was largely shut back in May. </div>
<div> </div>
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 Activity was down pretty much everywhere, as you might reasonably expect. 
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 First homebuyer transactions were...down. 
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<div>And the average mortgage size also declined, although borrowing capacity for many borrowers has increased compared to 18 months ago thanks to the salvo of five interest rate cuts, and the average mortgage size was up by some +18 per cent from a year earlier. </div>
 
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<div>In particular borrowers in Sydney and Melbourne have been flexing their extra borrowing capacity over the past year or so. </div>
 
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 The wrap 
<div>Overall, once you strip out the huge rip in refinancing there was much less housing lending and transactional activity in May. </div>
<div> </div>
<div>Housing prices have drifted a little lower since rolling over around the end of Q1 2020, but on much thinner volumes, and stock levels have fallen very sharply which has somewhat underpinned prices.</div>
<div> </div>
<div>Naturally the Victorian government now opting for a fresh six-week lockdown is going to lead another wave of local business closures over July and August, which will bring its own downside risks for Melbourne.</div>
<div> </div>
<div>Sydney, on the other hand, is now steadily reopening for business, and most other housing markets have been fairly flat through the COVID shutdown.</div>
<div> </div>
<div>Of course the lending figures are, as always, old news, reflective of historic activity from the end of April to the end of May.</div>
<div> </div>
<div>More timely indicators from the REA Group appear to be relatively upbeat.</div>
<div> </div>
<div>
Pete Wargent is the co-founder of AllenWargent property buyers and a best-selling author and blogger 
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Refinancing explodes to record high: Pete Wargent

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Some 43 per cent of mortgage holders are looking to refinance in light of COVID-19 and record low rates, according to a new survey from RateCity.com.au.
By comparison, a 2018 RateCity survey found just 19 per cent of borrowers were looking to refinance, following the Banking Royal Commission.
RateCity.com.au analysis of RBA data estimates that existing owner occupiers are paying over one per cent more than the lowest variable rate in market.
Sally Tindall, research director at RateCity.com.au, said the loyalty tax gets worse the longer you stick with your bank.
“It’s taken a pandemic to get people to shift their mindset, but hopefully we’ll come out of it more budget-conscious and less complacent towards our mortgages,” Tindall said.
“People won’t just tolerate overpaying anymore.
“The banks are pulling out all the stops too, putting some of the biggest cash back offers and rock-bottom rates on the table and adding more flexibility on fixed rate loans to attract new business – and it is working.
“The latest figures from the ABS for May showed refinancing increased 63 per cent compared to last year, and our research suggests it is not losing steam. 
“The best way you can get a rate cut is to turn yourself into a new customer and switch. If you aren’t in a position to refinance, pick up the phone and try some old-fashioned haggling with your bank,” she said.
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Mortgage holders looking to refinance doubles in two years: RateCity

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The highest ever number of Australians refinanced their homes in May, according to Finder.com.
The latest ABS lending data revealed that the total number and value of refinanced home loans peaked in May 2020.
The total value of these refinanced home loans exceeded $15.1 billion in May, up 26% from the previous high of $12 billion in April.
<img src="https://www.urban.com.au/images/2020/7/15/FINDER%201.png" alt="">
Graham Cooke, insights manager at Finder, said this shows more Australians are taking advantage of rock-bottom rates
“As budgets are stretched, a record number of people are deciding to get a better deal on their largest investment.
“While the value of houses may well drop in the next year, the mortgages on them will not,” he said.
“Historically low interest rates and a lack of investor spending are a double whammy to banks, but a boon for mortgage holders,” Cooke added.
For example, on the average loan of $494,462, Finder analysis shows the average standard variable rate from the Big Four banks is 4.04%.
If that rate were to drop 50 basis points to 3.54%, this would mean $36,287 saved over the life of the loan.
The number of refinanced loans jumped 30% in a month, from 25,998 to nearly 33,712 in May.
<img src="https://www.urban.com.au/images/2020/7/15/FINDER%202.png" alt="">
The record number comprised both external refinance loans (which involve people switching lenders) and internal refinance loans (which involve customers getting a better rate from their current lender).
External loans reached 21,473 and internal loans reached 12,239.
Despite all-time highs in both internal and external refi categories, 64% of all refinance loans are Australians switching lenders – the largest disparity ever.
Cooke said Aussies are shopping around and it is a good time to be looking for a lower rate.
“With the cash rate at 0.25%, the best home loan rates now start with a 2. If yours does not, it might be time to go home loan shopping.
“Additionally, now is a good time to ask for your bank to go the extra mile. Several lenders are offering to waive fees for new borrowers, and some are even offering extras like offset accounts at no additional cost.”
Some of the market's lowest variable rates in July 2020
<img src="https://www.urban.com.au/images/2020/7/15/FINDER%203.png" alt="">
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Record number of Australians refinanced homes in May: Finder.com

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The National Australia Bank will not take into account past income from holiday rentals, Airbnb and individual room rentals when considering income on home loan applications because of COVID-19.
The banning comes amid huge disruption in the short-term lease industry, Nine Entertainment's AFR reported.
For other properties NAB is increasing "rental shading."
Its reduced assessment of a borrower's capacity to service a loan, has been increased from 20 to 30 per cent to "cover increased uncertainty related to both new and existing rental payments, potential exposed vacancy periods and reduced rental income", according to the bank.
The NAB decision has also hit existing borrowers seeking to refinance to take advantage of lower interest rates and recent special offers.
Refinancing accounts for about 70 per cent of mortgage applications, more than double the rate in recent years, according to analytics from AlphaBeta, which is part of Accenture and the illion credit bureau.
Nine Entertainment has reported last month NAB began "coaching" mortgage brokers to quiz customers about the impact of COVID-19 on their personal and business income and how to detect whether they are receiving JobKeeper payments.
Six question to elicit more detailed responses from existing home loan borrowers about the pandemic are being asked, including whether they are requesting and or receiving any support, such as a repayment pause or holiday.
Other major lenders, such as Westpac Group, recently tightened credit policies for professionals and the self-employed.
Amid warnings that the impact of COVID-19 on customers "remain highly uncertain," Westpac, Bank of Melbourne, St George Bank and BankSA will also be withdrawing the lenders' mortgage insurance (LMI) waiver for accountants, lawyers, engineers, sports professionals and the entertainment sector.
The waiver is still available for medical professionals.
However the maximum loan-to-value ratio has been reduced from 90 per cent to 85 per cent.
"We are introducing the changes to reflect recent changes to the global and domestic economic outlook as a result of the pandemic," the bank said.
PAYG (Pay As You Go) and casual employees will now require payslips no older than 14 days.
There will also be closer checks to verify payslips.
Self-employed customers will be asked to provide Business Activity Statements (BAS) no older than the last quarter. 
Some banks have announced non-inspection valuations where a physical inspection cannot take place because of virus concerns.
Valuers are required to "undertake all practical measures" to confirm the external and internal details of the property in the absence of an inspection.
Banks have also introduced virtual signing of loan documents.
Earlier this year the major lenders were rolling out offers to attract new lending or refinancingfor the start of the year's sales.
NAB was offering a $2000 new lending cash bonus and $4000 refinance cash bonus.
Westpac Bank had a $2000 cash back.
ANZ's refinancing cash backs had previously ranged from $1200 for loans between $150,000 and $250,000 and $3500 for loans of $700,000 or more.
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COVID-19 pandemic is not the best time for home loan refinancing 

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Switching mortgages from the average standard variable rate to the average lowest rates on the market could save a mortgage holder nearly $48,000 of interest over the lifetime of a loan, new figures from Canstar reveal.
Canstar, Australia's biggest financial comparison website, calculated the average standard variable rate of a mortgage is 4.43%.
The average of the lowest rates is 3.71%, a difference in repayments of $159 a month, based on a $400,000 home loan.
Over the lifetime of a loan that equates to $47,653 of interest.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/2/Can-switch.jpg" alt="">
Canstar finance expert Steve Mickenbecker says what a difference a month makes, as the RBA look likely to cut rates in the not too distant future.
"Weak December quarter GDP numbers followed by lower than expected jobs growth, have taken a rate increase off the agenda altogether," Mickenbecker says.
He says a lower cash rate looks inevitable, however suggested for now the RBA is still monitoring important figures in case there are further declines.
"The RBA could be keeping its powder dry to leave room to move if we start to see even more disturbing GDP and jobs numbers, and property prices in coming quarterly results.
"Lenders are factoring in cuts, with 274 fixed rate cuts this calendar year. The bigger rate cuts are in the 4 and 5 year terms, with funding costs for Australian lenders following the downward trend for US longer term interest rates.
"The increased wholesale funding costs that drove up home loan rates for existing borrowers up from September last year have since been reversed, with the bank bill swap rate falling again.
"Lenders have not returned these rate increases, but have invested them in lower rates for new borrowers.
"When the RBA does move, the questions will be how much will the banks pass on and will cuts be enough to make a difference?
"The most likely answers are not all of it and there will be a long lag before any rate cuts work through the economy.
 
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jrobinson-rf4aSBido9

Switching mortgages could save nearly $48,000 in interest: Canstar

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Westpac are seeking to take market share as interest-only loans approach their expiry by offering a $2,000 rebate to new customers refinancing with them.
Westpac and its subsidiaries will offer the $2,000 rebate for anyone refinancing with a loan amount of over $250,000, according to the Australian Financial Review.
The group is also offering a $1,000 purchase rebate for every property bought with a loan amount of over $250,000.
A record $170 billion of IO loans are set to expire over the next two years.
Around 45 percent of the Westpac loan book last year was made up of interest-only loans, followed by Commonwealth Bank, the nation's biggest lender, who had around 40 percent.
According to a recent analysis by investment bank Morgan Stanley, IO lending is expected to fall from around 40 percent of the big four's total loan book at the height of the real estate boom in 2017 to around 20 percent by next year.
This year around 25 percent of major lenders' IO loans, which equates to around $104 billion, is set to expire, the investment bank's analysis showed.
 
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Westpac to offer new borrowers $2000 refinancing rebate on IO reset

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The AMP Bank is lifting its ban on refinancing investment property loans. "The lending market remains very competitive and AMP Bank continues to respond by adapting its lending practices where necessary to provide the best conditions for our customers and for managing our growth," a bank spokesman told Fairfax Media.
AMP Bank only has one per cent of property loans but the group is one of the biggest players in self-managed super funds, which invest heavily in residential and commercial property.
AMP Bank is also reducing deposits.
The bank said it had imposed the tougher lending conditions to meet strict lending guidelines by the Australian Prudential Regulation Authority.
It is decreasing deposits for self-managed super fund loans from 50 per cent to 30 per cent of the loan.
Minimum deposits for all other loans "with a predominant purpose for an investment property purchase or refinance" are dropped from 50 per cent to 20 per cent.
 All loan applicants will from today be asked to provide detailed answers to 14 questions about basic and discretionary spending on dozens of household items.
Information required about basic monthly living expenses includes spending on clothing, footwear, cosmetics, transport, groceries, and home and contents insurance.
Discretionary living expenses covers spending such as dining out, entertainment, holidays, pay TV, nannies and education, including outside school hours care, private school fees and books.
 
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