Australians Ignore Refinancing Opportunities

21st Apr, 2017 | Local News

In this article:
Cronulla Refinancing Advice: One of the most important yet undervalued ways to save money.

Jonathan Buckley

At Yellow Brick Road Cronulla we believe there are huge savings to be had by refinancing, and as your local mortgage broker, we are here to help. Recently, Yellow Brick Road reviewed the situation of 1,000 Australians who obtained a home loan more than two years ago and these were their findings:

  • 40 per cent of those surveyed said they had never refinanced.
  • 19 per cent hadn’t refinanced in over five years
  • 6 per cent had refinanced four to five years ago
  • 8 per cent had refinanced three to four years ago and 10 per cent had refinanced between two to three years ago.

Mark Bouris, Executive Chairman of Yellow Brick Road said that he found it hard to believe that so many people were avoiding action, particularly when you consider that the big banks are continuously raising interest rates outside changes by the Reserve Bank.

It’s outrageous to think people are still paying high interest despite the opportunity to pay less. In effect you’re just handing the banks extra money. Many people take the time to drive to the cheaper grocery store just so they don’t pay an extra dollar for milk, yet when it comes to home loans they stick their head in the sand, Mark said.

According to recent analysis the average discount applied to new mortgages has steadily increased in recent years. A household who took a loan out in 2010 when the average discount was around 20 basis points would today have access to discounts in the range of 90 basis points or .9%. As a mortgage broker, we dedicate our time and skills to working with mortgage products and are across all the discounts on offer in the market, some of which are not advertised online.

Mark said that even allowing for potential fees and transfer costs, it is likely that those on a home loan secured a number of years ago will be able to save each month by refinancing.

For those who took out a home loan five years ago, the average rate after reductions would be 5.3 per cent. The potential savings on an average $350,000 loan with 25 years remaining could be thousands. For example, if you refinanced to a rate of 4.8 per cent, you would save $30,660 in interest over the remaining life of your loan. There are also many lenders offering very competitive rates as low as 4.1 to 4.2 per cent, if you do your research then you may find your savings could be significantly more, he said.

Why aren’t people refinancing?
Not believing enough money would be saved in the process (31 per cent)
Thinking the fees and charges would outweigh the benefits (29 per cent)
And perceiving the process as too much of a hassle (18 per cent).

As your local Yellow Brick Road broker in Cronulla, we can show you that the savings can be huge and easily outweigh any small fees incurred in the process. If searching online for the cheapest rates is confusing, we can do it for you and often times as a mortgage broker we have access to deals that are not advertised online.

With interest rates dropping to a low that no one in my generation would have thought possible, it’s crazy to not find out if you can save. If you don’t have the time, the latest knowledge or the expertise – don’t feel overwhelmed. There are people out there to help you. Go speak to a mortgage broker and they will do the work for you. Now is the time to take to do your research and take action, Mark said.

Who is most at risk of not refinancing?
In our survey we’ve some interesting trends when it comes to who does and doesn’t refinance:

  • He biggest culprits of failing to refinance in the low rate environment were Queenslanders with 63% saying they had either never refinanced or hadn’t for at least 5 years. Following Queensland (QLD) was New South Wales (NSW) at 61%, Western Australia (WA) at 58%, South Australia (SA) following at 57% and Victoria (VIC) at 55%.
  • QLD and VIC both had the lowest number of residents refinancing in the past 2 years (14%). SA was next at 18%, WA at 19% and NSW at 19%.
  • 40% of both males and females had never refinanced. However a slightly larger amount of females (18%) than males (16%) had refinanced in the past 2 years.
  • 45% of young adults (25-34 year olds) with home loans said they have never refinanced, whereas their older counterparts were more likely to have refinanced; 35-44 year olds (41%), 45-54 (41%), 55-64 (36%) and 65 plus (40%).
  • Yet more young adults had refinanced recently – 28% of the 25-34 year olds refinanced in the past 2 years. This followed with 22% of 35-44 year olds, 13% of 45-54 year olds, 11% of 55-64 year olds and 10% of those aged 65 or older.

We have consistently found that both young adults and older people can all benefit from refinancing their mortgage.

Mark said that for anyone who hadn’t refinanced in the past several years this is their wake up call to go out and at least ask the question about potential savings.

Costs are high these days. And it makes me angry that banks are profiting from money that should be in the consumers’ hands. At Yellow Brick Road, we are striving to educate Australians to empower them to find a better deal. At a time where rates are the lowest in history, everyone should be out there speaking to their lender and mortgage broker about what they can do to save, he said.

If you haven’t considered refinancing lately, come and see our Yellow Brick Road team in Cronulla to see just how much you could save by switching to the best mortgage for your specific needs.

We have you covered on all stages of your property journey