Research from Aussie Home Loans has laid bare how far the refinancing market still has to go, with just 7% of mortgage holders having taken advantage of the ultra-low rate period.
Despite the refinancing boom that has seen volumes skyrocket at aggregators, 57% of respondents to Aussie’s research said that they had no interest in refinancing and 28% said that they did not know that rates were as low as they were.
Lendi Group CEO David Hyman, who sits atop Aussie, Lendi and Domain Home Loans, said that customers were missing out on a huge chance to save cash by not refinancing while they have the chance.
“One of the things that continues to amaze us, despite high volumes, is that if you look at the last financial year, just over 7% of all mortgages were refinanced,” he said.
“There’s a massive opportunity cost sitting out there. If you took out a loan in 2019 or early 2020, it’s highly likely, according to our data, that there is a 50-80 basis points gap there. But only 7% of people have refinanced.”
“When we talk to customers through our research programs, more than half of them say they’re not interested in refinancing. That’s staggering given the gap. We’re seeing more people take that step, but certainly below where it should be. It’s a massive inertia in the market.”
“That comes on the back of potential rises in interest rates on the back of inflation data. There’s really low fixed rates in the market and we’re strongly recommending that people take the plunge.”
Hyman said that there was an onus on brokers to provide education and to inform their customers of the changes that have occurred in the market in the last few years.
“We broadly describe the issue as ‘inertia’, but when you break that apart, there’s a few key reasons for it,” he said.
“Firstly, there’s the place that people get to where they have their loan in place and they think of the two- or three-year rate and don’t know how easy it is to refinance.”
“The second aspect is that most people don’t go through the motions of what it is costing them. The gap between front book and back book, for most customers, is between 50 and 80 points, so that could be hundreds of thousands over the life of the loan. It might only seem like a couple of hundred a month, but it really pays off if you keep your repayments.”
“It’s generally an education piece because people don’t realise that it’s easier to refinance these days: there’s been a lot of innovation in tech and approval processes and people don’t realise how much that they’re leaving on the table.”
“Speaking from a Lendi Group perspective, which covers Lendi, Aussie and Domain, our reason for being is to educate consumers that there is an easy way. The home loan process has been frustrating and slow for a number of years, and our role in the industry is as an agent of change to drive banks, regulators and processes.”
