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Mortgage lifeline: Refinancing tidal wave looms

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Thousands of Aussie mortgage holders are planning on refinancing in the next 6 months, according to new research by Finder.

A Finder survey of 1,054 respondents – 313 of which have a mortgage – revealed almost 1 in 5 (18%) – equivalent to 594,000 mortgagors – are planning to refinance their home loan by July.

The research found 15% – equivalent to 495,000 borrowers – say they might refinance if interest rates rise even further.

More than half of mortgagors (54%) say a cheaper interest rate is what they are seeking, followed by an offset account (12%) and a sign-up cash bonus (11%).

A total of $17.8 billion worth of home loans have been refinanced over the past 12 months – a 4% increase over the year, according to data from the Australian Bureau of Statistics (ABS).

Richard Whitten, home loans expert at Finder, said lenders should expect an influx of borrowers looking for lower interest rates.

"While most borrowers are looking for a better deal and are not in mortgage stress, thousands of homeowners are struggling right now, being forced to fork out thousands more on their mortgages.

"Many are looking for relief: some are missing meals or bills and are looking at the possibility of losing their homes."

Following 10 successive interest rate rises, the average mortgage holder will be paying over $13,000 more a year in interest compared to this time last year.

Based on the average loan size of $604,346, the average monthly repayment has increased by a staggering $1,111 a month.

Whitten said many households are feeling financial stress and are looking for how much they can save by switching to a more competitive interest rate.

"Cash flow is a major concern right now and many aren't earning enough to keep up with interest rate hikes."

Finder data shows interest rates as low as 4.74% are available to refinancers.

"The mortgage is often the biggest household expense and also the greatest opportunity for savings.

"Even loans that are less than 12 months old need to be re-evaluated.

Whitten said those worried about missing a payment should talk to their lender as soon as possible.

"It's better to negotiate some kind of hardship arrangement or a repayment holiday than to simply stop repaying the loan. This harms your credit score and puts you at risk of a default," Whitten said.

Almost 1 in 4 (23%) millennial homeowners are planning to refinance within 6 months, compared to just 4% of baby boomer borrowers.

Are you planning on refinancing your home loan in the next 6 months?
Yes18%
Maybe, if interest rates rise again15%
No67%
Source: Finder survey of 313 respondents with a mortgage, January 2023
What is the most important to you when looking to refinance your home loan?
Cheapest interest rate54%
An offset account12%
Sign-up cash bonus11%
Quick approval time7%
Smooth application process (e.g. easy online processes)5%
Good customer service5%
Access to a physical branch3%
Access to a human being3%
Source: Finder survey of 313 respondents with a mortgage, January 2023

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