believe at Yellow Brick Road North Sydney that refinancing your loan is one of
the best things you can do to save money. So, Yellow Brick Road reviewed
the situation of 1,000 Australians who obtained a home loan more than two years
ago, and these were the results:
- 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,
the well-publicised and historically low interest rates and the potential
“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 that the benchmark 1.75% interest
rate is significantly lower than the average 5.13% that Australians experienced
between 1990 and 2015, with the all-time peak at 17.50% in January of 1990.
According to our 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%, a huge improvement.
This combined with the fact that 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 per cent, whereas our Yellow Brick Road mortgage brokers
know that rates are now available at around 4.8 per cent, or better.
But what do these rates mean for
Well, Mark said that even allowing for potential fees and
transfer costs, it is likely that those on a home loan secured several 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 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. This means that something as
simple as contacting your local Yellow Brick Road mortgage broker in North
Sydney could save you heaps on your current home loan!
Why aren’t people refinancing?
Moreover, when surveying customers to find out why they aren’t
refinancing, we found that their top three reasons are:
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.
Who is at most risk for failing
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.
you consider how much you can save by just taking a quick look at your mortgage,
perhaps now is the time for you to come by our North Sydney Branch and speak to
one of our experienced mortgage brokers to find out how you can save more on
your home loan.