Switching lenders saves Aussies more, says PEXA

Australians are saving an estimated $1,524 per year by refinancing their home loan, according to Property Exchange Australia’s (PEXA) first consumer report into refinancing sentiment and behaviours across the nation during the past year.

More than 1 million Australians refinanced their home loan over the past 12 months, saving an estimated $1,524 per year on average, the PEXA Insights Refinancer Sentiment Research Report confirmed.

Most interestingly, it highlighted that Australians who refinance their mortgage to a new lender save an estimated $1,908 per annum on average, compared to an estimated average saving of $384 per annum for home owners who refinanced with their existing lender.

Australia has experienced record refinancing activity, with PEXA’s Refinance Index reaching 201.1 in the week ended 4 September — and there are no signs of this trend slowing, with the PEXA report also revealing almost 2.3 million Australians were considering refinancing in the next two years.

There are currently nearly 8 million Australian mortgage holders, and analysis from the report suggests 31.2 per cent of mortgage holders are in the “refinancing mindset”, PEXA explained.

Of note, 81 per cent of those who recently refinanced expected to refinance again within the next two years, it outlined.

With research conducted throughout May and June 2022, the PEXA Refinancer Sentiment Research Report suggested there are considerably more savings to be made by switching lenders — but 55 per cent of recent refinancers stayed with their existing lender.

A further key insight into refinancing consumer behaviour included home owners refinancing their home loan on average an estimated 5.6 years after purchasing the property.

What’s driving the refinance rush?

According to the PEXA report, the top reasons for refinancing were: wanting a more competitive interest rate; needing to save money; and broker recommendations.

The top three barriers to refinancing were: interest rate instability; the onerous application process; and current lender providing a competitive rate.

PEXA Insights head of research Mike Gill explained: “More and more Australian consumers are hunting out the most competitive interest rates, leading to record high levels of refinancing.

“This momentum is set to continue, as mortgage holders are investing on average six weeks into researching options that best suit their circumstances.

“Our consumer research confirms there is a level of uncertainty felt by mortgage holders, with an estimated 71 per cent feeling anxious about the prospect of rising interest rates, 49 per cent worried about their job/financial security, and 73 per cent are regularly reviewing their interest rate against market trends.” 

Primary residence most common priority

The estimated average value of properties being refinanced was $732,000 and, in most cases, it was the refinancer’s primary residence, PEXA highlighted.

On average, refinancers had approximately $491,000 remaining on their home loan, with an estimated average of 34 per cent of the household income being spent on mortgage repayments. 

The research contained within the PEXA Refinancer Sentiment Research Report was undertaken by Nature Research, commissioned by PEXA Insights, with the aim to provide new insight into Australian property owners’ attitudes and behaviours regarding refinancing their home loan.

[Related: PEXA expands UK footprint with latest acquisition]