Get set for a mortgage refinancing tsunami

The Reserve Bank of Australia’s (RBA’s) indicator lending rates show that the average discount mortgage rate was only 3.65% in October and the average 3-year fixed rate was only 2.39%:

The wide gap between variable and fixed rates, alongside the bevy of fixed mortgage deals below 2%, is projected to cause a mortgage refinancing boom according to RateCity:

According to RateCity analysis, there are now some 30 lenders offering home loan rates below 2 per cent.

“It’s no longer just online lenders with low rates. The bigger banks are now starting to steal their thunder offering up fixed rates under 2 per cent,” RateCity.com.au research director Sally Tindall said.

“For the average borrower, refinancing to a low fixed rate could save them thousands of dollars a year…

Finder analysis found one in three borrowers plan to refinance over the coming 12 months…

“Borrowers see record low rates and don’t want to be stuck paying more for their mortgage than they need to,” Finder insights manager Graham Cooke said.

“The pandemic has made people assess where every dollar they earn goes and refinancing a mortgage can lead to a huge leap in savings.”

According to the ABS, mortgage refinancings were already running at record high levels – up 38% year-on-year:

The mortgage refinancing boom will inevitably continue as borrowers in Australia take advantage of record low rates and shift away from variable to fixed rate mortgages.

Aussie borrowers would be crazy not to take advantage of the insanely cheap mortgages on offer.

Unconventional Economist

Comments

  1. I'll Stir Fry You in My Woke

    Are these comp rates including the wealth packages? Changes the headline rate a bit eh

    • Wealth package only adds $395/year, equivalent to 0.1%. But – perhaps you meant that not everyone will “qualify” for the low rates?

  2. Take it 1/3 of the book looking to refinance won’t be coming from the mortgage holiday ranks. Word was they were stuck with a black mark against them.

  3. truthisfashionable

    Will this mean the banks are able to close out their more expensive offshore funding and access the RBA TFF(?) Possibly allowing mortgage rates to fall further?

  4. Yes will refinance. If they are preparing to offer 1.99% fixed, isn’t that a sign rates are going lower still…but will take it up

    • mark777 yeah id definitely punt on that (rates going lower) – in fact im on variable (2.64%) waiting for them to continue dropping (ideally to or below 1%) before fixing for 3-5 yrs (With RBA TFF at 0.1% banks can afford it (still make a margin on say 1.1% loans) !

  5. Arthur Schopenhauer

    Most of the low rates cost more than the discount variable rate over 3 years. Read the fine print before committing.

  6. As per comments above….If banks are offering 1.99 Fixed for 3/4 Years, They are expecting their costs of funding will be going down from here.