YBR

Australians Ignore Refinancing Opportunities

At Yellow Brick Road Darwin we believe that refinancing your home loan is one of the most valuable things you can do. We were shocked to find out from a Yellow Brick Road survey of 1,000 Australians who obtained a home loan more than two years ago that:

  • 40% of those surveyed said they had never refinanced
  • 19% hadn’t refinanced in over 5 years
  • 6% had refinanced 4 to 5 years ago
  • 8% had 3 to 4 years ago
  • 10% had between 2 to 3 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 considering the well-publicised historically low interest rates and the potential savings available.

“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.

The Reserve Bank of Australia data shows the benchmark 1.75% interest rate is significantly lower than the average of 5.13% that Australians experienced between 1990 and 2015, and considerably lower than the all-time peak being at 17.50% in January of 1990.


Per 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 now have access to discounts in the range of 90 basis points or 0.9% which is huge.


Combined with the fact that the banks have not passed on the full RBA reduction means that this 2010 loan may today be on a current variable rate of around 5.3%, whereas rates are now available at around 4.8%, or better. In other words, you may be missing out on a great opportunity to save money on your current home loan. If you think that’s you, then make sure you speak to one of our mortgage brokers in Darwin today.

 

But what do these rates mean for your mortgage?

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

 

“For those who took out a home loan five years ago, the average rate after reductions would be 5.3%. 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%, 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%, if you do your research then you may find your savings could be significantly more,” he said. This means that something as easy as contacting your local Yellow Brick Road mortgage broker in Darwin could save you plenty in the future.

Why aren’t people refinancing?

According to our survey, Australian’s said the top 3 reasons they failed to refinance their mortgage were because:

1.    31% didn’t believe enough money would be saved in the process

2.    29% thought the fees and charges would outweigh the benefits and,

3.    18% perceived the process as too much of a hassle

 

“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.

 

So who is at most risk for failing to refinance?

In our survey we’ve some interesting trends when it comes to who does and doesn’t refinance:

●     The 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.

 

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.


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