Mortgage Choice 2010 refinancers survey results revisited

The 18-year old national company's customer service centre is presently receiving double the number of borrower requests to talk with a mortgage broker. Many are from potential refinancers.

The comprehensive research completed just over three months ago asked a range of questions to 1,028 Australians who had refinanced their home loan during the 12 months prior.

Of particular interest are the statistics around exit fees, which showed 26% of respondents delayed their refinance due to charges they would have incurred by doing so earlier. Overall, 46% did not pay any exit fees upon refinancing.

68% saw their interest rate drop upon doing so. Of these, almost one quarter (23%) were saving over $300 per month while 88% were saving more than $50 per month.

The main motivation to refinance was to switch to a ‘cheaper' loan, for 24% of respondents, followed by the need to consolidate debts, for 11%.

Mortgage Choice spokesperson Kristy Sheppard said, “There is a lot of misplaced fear out there about refinancing. Depending on the current home loan, lender and length of time into the loan, a large portion of people who refinance don't pay any fees to exit their contract.”

“It can also be quite a straightforward operation. Over four in every five of our survey respondents said refinancing was either a very easy or relatively easy process.

“At a time like this, it's especially important for borrowers to explore advantages and disadvantages of the many options available to them today before making a concrete decision about refinancing. There is a wide range of lenders and loan products in the market, more than most people realise.

“We were pleased to find the majority of the survey's recent refinancers did their research, shopped around, saved money, avoided large exit fees, found it relatively simple and had no regrets.

“It may be that a borrower's best home loan is still their current home loan but, for peace of mind, they should at least check the choices available to make sure there aren't savings to be made.

“Using an experienced mortgage broker should ease the hassle and time it takes a borrower to research the home loan market to find those tailored to their financial situation, lifestyle and needs.”

Cost

Of the 54% of respondents who did incur mortgage exit fees:

• 6% paid from $1 to $100 (3% of all survey respondents)
• 10% paid from $101 to $250 (5% of all survey respondents)
• 25% paid from $251 to $500 (13% of all survey respondents)
• 30% paid from $501 to $1,000 (16% of all survey respondents)
• 20% paid from $1,001 to $5,000 (11% of all survey respondents)
• 10% paid from $5,001 or more (5% of all survey respondents)

Motivation

The most common motivations respondents gave for refinancing were to:

1. 24% - switch to a cheaper loan (combination of lower interest rate and fees/charges)
2. 11% - consolidate debts
3. 10% - fund a renovation
4. 9% - buy an investment property
5. 8% - access additional funds for other reasons (eg. holiday, day to day living, etc.)

76% spent six months or less researching their options before refinancing, while 21% spent six to 12 months and 4% researched for over one year. Of these, 8% took seven years or more to refinance, perhaps because they were trying to avoid exit fees.

Exactly half the respondents said it was their first time refinancing this particular loan. For 27% it was their second time, for 15% their third and for 8% their fourth or greater.

Savings

While 18% of respondents saw their interest rate remain the same upon refinancing and 14% saw it increase, 68% reduced their rate in the process. Of these, 22% reduced it by 0.25 percentage points or less, 47% by 0.26 to 1 percentage point, 21% by 1.01 to 2 percentage points, 7% by 2.01 to 3 percentage points and 3% slashed it by 3 percentage points or more.

Respondents who managed to reduce their interest rate were making these savings:

• 10% were saving up to $50 per month
• 21% were saving between $51 and $100 per month
• 16% were saving between $101 and $150 per month
• 15% were saving between $151 and $200 per month
• 13% were saving between $201 and $300 per month
• 12% were saving between $301 and $500 per month
• 7% were saving between $500 and $1,000 per month
• 4% were saving between $1,001 or more per month

Choice

54% of respondents changed loan product and lender, compared to 46% who stayed with their existing lender and simply switched loan product. Interestingly, of those who changed loan product and lender, 78% saw their interest rate decrease. In comparison, only 56% of those who stayed with the same lender and changed loan product saw their interest rate decrease.

Four in five respondents refinanced with a bank, with 83% of these choosing a major. 8% chose a non-bank lender, 6% a credit union, 2% a building society, 2% said ‘other' and 2% were unsure.

45% used a mortgage broker to help them refinance their loan. 61% of those who used a mortgage broker changed loan product and lender, compared to just 26% who did not use one.

Notwithstanding who guided them through the process and which lender and loan product they chose, 37% said refinancing was a very easy process and 49% said it was relatively easy. Only 10% found it relatively or very difficult, with females more likely than males to say so.

Regrets

When refinancing, respondents were most concerned about:

1. 22% - the switch and exit fees involved
2. 18% - making the wrong decision
3. 13% - the time it would take
4. 10% - the confusion involved in the whole process
5. 8% - the fees they may incur if they made the wrong decision and had to refinance again
6. 8% - whether they would find a better suited loan

Despite any concerns, 89% of respondents had no regrets about their decision to refinance. 

Of those with regrets, 25% wished they had chosen a similar loan product from a different lender, 25% regretted not refinancing sooner, 20% said they should have researched the mortgage market more beforehand, 11% wished they had visited a mortgage broker to investigate a broader range of options and 11% regretted not staying with their existing lender and simply switching loan product.

For further information or to arrange an interview, please contact:

Belinda Williamson                                           
Mortgage Choice                                                        
(02) 8907 0472 or 0407 416 124          
belinda.williamson@mortgagechoice.com.au