Wednesday, January 11, 2023
HomeMortgageBroker weighs in on refinance boom

Broker weighs in on refinance boom


A broker has shared his views on the refinancing and cashback trends in the home loan market, as competition among lenders heats up.

Brisbane mortgage broker Tom Uhlich (pictured above left), who owns brokerage Boss Money, said there was slight panic in the market with many wanting to refinance to “low” fixed rates that no longer existed.

“We have also seen a segment that are refinancing for cash out to hold as a buffer for the rocky road ahead (which is a strange concept), getting cash-out at higher rates to help cope with higher rates,” Uhlich said.

“Since late 2022, we contacted our clients and had them work out their repayments at 6%. Then we suggested they set up a separate account and pay in the difference between their low fixed rate and 6%, so that way they are training themselves to make repayments at the higher rate.”

Uhlich said the other conversation brokers should be having with their clients is whether they should stick with a fixed rate or move to variable.

“Given fixed rates are considerably higher than they were 12 months ago, it’s tough looking at fixing again,” he said. “However, if the variable rate goes to 8%, then fixing for five years at 6% isn’t so bad.”

The Australian recently reported  that many mortgage holders that secured record-low rates during the pandemic are nearing the end of their fixed rate terms (known as the “fixed rate cliff”) and are confronting variable rates that could be double what they are currently paying. With Australian mortgages totalling approximately $500bn and home loan growth slowing, lenders are fighting harder for refinancing and new business.

Speaking to The Australian, AFG chief executive David Bailey (pictured above right), said the home loan market remained as competitive as he’d ever experienced.

“The number and volume of cashback offers is just unprecedented and it seems to be the new norm,” Bailey said. 

“My view is that banks, rather than offering a cashback, should just put it into the rates to the customer. The refinance market is probably going to be the most competitive space until such time that house prices settle, bringing new customers back into the market again.”

Bailey said despite AFG having more than 70 lenders on its panel and given how much rates had increased in recent months, some fixed rate customers would no longer meet loan serviceability requirements, meaning as they moved to a variable rate they might be forced to stay with their current bank or pay mortgage insurance to switch.

“That’s inevitable unfortunately and that might temper some of that refinance activity as banks were benefitting from not passing on higher rates to savers which give them a funding advantage,” he said.

“My gut feel is there is still another six months before that (bank) funding advantage around the deposit book becomes less of an advantage. That won’t happen until such time that customers start demanding higher deposit rates and we are starting to see a little bit of that.”

Meantime, new Mortgage Choice research has found one in three mortgage holders plan on refinancing their home loan in 2023. The survey results found 44% of borrowers aged between 35 and 44 were considering refinancing, while 41% of borrowers have refinanced their loan within the past two years and 38% have used a mortgage broker before.

PEXA found the volume of mortgage refinancing increased 0.4% in the first week of December 2022, as borrowers try to find a better deal following consecutive interest rate increases. This was in response to the Reserve Bank’s decision on December 6 to lift the official cash rate 0.25% to 3.10%, the eighth straight month of OCR increases.

According To RateCity, there are currently 34 lenders offering cash back in the mortgage market, which is almost a record level. This compares to about 29 lenders in July last year.

Cashback offers on RateCity.com.au January 11






































Lender

Cashback

Who For?

Conditions

AMP

Up to $4,000

Refinancers,


new borrowers

Loan size of $750K+ for $4K. Select loans only

ANZ

$2,000-$4,000

Refinancers

LVR of 80% or lower for $4k

Bank of China

$3,000

Refinancers

 

Bank of Melbourne

$4,000

Refinancers

 

Bank of Queensland

$3,000

Refinancers

 

BankSA

$4,000

Refinancers

 

BankVic

$1,500

Refinancers

Owner-occupiers only

Bankwest

$2,000

Refinancers

 

bcu

$3,000

Refinancers

 

CBA

$2,000

Refinancers

 

Citi (via a broker only)

$3,000-$5,000

Refinancers

Cashback on $500K loan is $3K

Credit Union SA

$2,500

Refinancers

Not available on lowest rate loan

Defence Bank

$4,000

Refinancers

 

Geelong Bank

$2,000

Refinancers

Owner-occupiers only

Great Southern Bank

$3,000

Refinancers

 

Greater Bank

$3,000-$4,000

Refinancers

Cashback on $500K loan is $4k

Heritage Bank

$3,000

Refinancers,


new borrowers

 

HSBC

$3,288

Refinancers

 

IMB Bank

$2,000

Refinancers

 

ING

$3,000

Refinancers

 

ME Bank

$2,000-$4,000

Refinancers

LVR of less than 60% for $4K. LVRs between 60% – 80% receive $2K

MyState Bank

$2,000-$3,000

Refinancers

Cashback on $500K loan is $3K

NAB

$2,000

Refinancers

 

Newcastle Permanent

$2,000-$3,000

Refinancers

Cashback on $500K loan is $3K

People’s Choice

$4,000

Refinancers

 

Queensland Country Bank

$3,000

Refinancers

Investors only

RAMS

$4,000

Refinancers

 

Reduce Home Loans

$2,000-$10,000

Refinancers,


new borrowers

Cashback on $500K loan is $3K. Not available on lowest rate loan

Regional Australia Bank

$2,000

Refinancers

 

St.George Bank

$4,000

Refinancers

 

Summerland Credit Union

$2,000-$3,000

Refinancers

Cashback on $500K loan is $3K

Suncorp Bank

$3,000-$4,000

Refinancers

Cashback on $500K loan is $3K

ubank

$4,000-$5,000

Refinancers,


new borrowers

Cashback on $500K loan is $4K

Westpac

$2,000

Refinancers

 

Source: RateCity.com.au

 

Lowest fixed rates for owner-occupiers paying principal and interest, January 11

 









Loan Type

Lender

Advertised Rate

1-year fixed 

Bank Australia

4.64%

2-year fixed

RACQ

5.19%

3-year fixed

Police Bank

5.19%

4-year fixed

Bendigo Bank/Macquarie Bank/ING

5.49%

5-year fixed

RACQ

5.39%

Note: rates are for owner-occupiers paying principal and interest. LVR requirements apply.

Source: RateCity.com.au

 

Lowest variable rates for owner-occupiers paying principal and interest, January 11

 









Lowest Rate

Advertised Rate

Hume Bank

3.99% for 2 years then 4.49%

Bank First

4.44%

Auswide Bank

4.46%

Bendigo Bank

4.47%

Qudos Bank

4.49%

(Excludes lenders that have not announced their Dec RBA changes)

Source: RateCity.com.au

What do you think about the refinance boom? Share your thoughts in the comments section below.

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