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The number of refinancers in New South Wales has increased amid COVID-19.
Key points:
The value of loans being refinanced in April was more than 50pc higher than a year earlier.
Some borrowers are saving thousands of dollars a year in reduced repayments.
But not all borrowers are able to get a new loan as falling house prices and rising unemployment make lenders more cautious about who they lend to.
Refinancing is the process of taking out a new mortgage to replace an existing loan.
While this can in most cases be with the same lender, it often involves switching to another bank to gain an advantage over your existing loan terms.
It might be time to think about switching your loan if you have been thinking about moving home or renovating. Refinancing could also give you access to additional features like an offset account or a lower interest rate.
The four major banks in Australia managed to regain their share in the refinancing space in NSW amid the outbreak, according to the study. In fact, they accounted for 66.9% of refinanced loans in August 2020.
Since the onset of the outbreak, the major banks' share of overall refinancing in the state has increased while that of non-authorised deposit-taking institutions (ADI), domestic banks, foreign ADIs, and customer-owned banks decreased.
Figures from the ABS show new home
lending plunged $2.15 billion in May,
the biggest monthly drop ever recorded.
The ABS lending indicator statistics show new home lending dropped by 11.59 per cent, month-on-month, according to the seasonally adjusted data.
Refinancing, however, hit a record high – the number of external refinances increased by 29.19 per cent from April to May, and 63.10 per cent, year-on-year, according to the seasonally adjusted figures.
The banks have started to offer attractive rebates, and fixed rates are quite low and very attractive, so naturally there's been an influx of inquiry.
Reasons to consider refinancing your existing home loan:
To get a better interest rate or different features and add-ons such as redraw facilities or flexible payments.
To use the equity in your home to borrow money to renovate or improve your lifestyle with a new car or holiday.
To consolidate debts such as a personal loan, car loan or credit card into your mortgage so it’s easier to manage your finances.
To save money by securing a better home loan rate.