The rise in interest rates in early 2022, has driven a growing number of people to find a better deal for their home or investment property loan.
In the PEXA Mortgage Insights Report for FY22, it showed a sharp rise in lending activity for the 2022 financial year. Refinancing in particular saw a sharp jump from about April 2022 which is around the time of RBA’s first interest rate rise this year on 3rd May.
The report showed an increase in refinancing for residential and commercial property across all Eastern seaboard states with Victoria up by 23.7% YoY to June 22. Non-bank and non-major banks were more successful in winning refinancing deals.
The July 2022 decision by the RBA to raise the cash rate again is likely to further fuel the trend for people to revisit their loan agreements to get a better deal. A large number of fixed term loans will reportedly mature over the next 18 months which will see a continued high volume of loan refinancing. Fixed rate loans doubled from 20% in 2020 to 40% in 2022.
The Australian News reported in July 22, refinancing is expected to peak in 2023. To wrestle back market share, the major banks are putting in place 10-minute mortgage planforms to make it easier for people to engage with them. It targets mostly existing lenders with PAYE income and LVR’s (loan to value ratio) of up to 80%.
While we are encouraged to shop around our home loans, switching lenders is not always straight forward. The higher 3% serviceability buffer that was introduced by APRA in October 21, may subject the borrower to more stringent conditions.