Why you might want to refinance sooner rather than later

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Thinking about refinancing? As interest rates rise, so do the hurdles you need to clear. Here’s why you might want to look at refinancing soon to avoid potentially missing out.

When was the last time you refinanced?

If the answer is “never”, or you can’t actually remember, there’s a good chance you’re paying a higher interest rate than you could be due to the “loyalty tax”.

You see, the banks don’t think you’re paying attention, and as such, they only offer their lowest rates to new customers in a bid to win them over – as proven by the RBA.

In fact, a recent RateCity analysis found that customers who stay loyal to their bank could be hit with an extra $5,101 in interest over the next three years alone (based on a $500,000 loan taken out with CBA in 2019).

For a $750,000 loan that would be an extra $7,652 in interest, and for a $1 million loan it’s $10,202 extra.

This is a big reason why owner-occupier refinancing across the country rose 9.7% in June to a new record high of $12.7 billion, according to the Australian Bureau of Statistics.

Great. But why is refinancing now so important?

Ok, so when you refinance, your new lender must assess something called your “home loan serviceability”.

Basically, that’s your ability to meet your home loan repayments at an interest rate that’s at least 3% above the rate you’re being offered.

And as you might have seen on the news, the big four banks are tipping the RBA’s official cash rate to increase from 1.85% in August to anywhere between 2.60% (Commbank forecast) and 3.35% (ANZ forecast) by November.

That means as interest rates go up, so too will the hurdle you’ll need to clear for home loan serviceability when refinancing.

All in all, that means the sooner you refinance, the lower the hurdle you’ll need to clear to ensure you’re not stuck with your current rate and lender.

How to explore your refinancing options

This is the easy bit! Simply get in touch today and we’ll help you get the ball rolling.

And even if you don’t want to refinance with another lender, there’s always the option of asking your current lender to review your rate, indicating that you’re prepared to refinance if they don’t come to the table.

After all, loyalty should be a two-way street!

So if you’d like to find out more about what options are available to you, give us a call or flick us an email today – we want to help you through the period ahead as much as we possibly can!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Refinancing numbers are surging across the country, here’s why

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Rising interest rates got you feeling a little vulnerable? It might be time to take some control back by refinancing or asking for a rate review. Here’s why we’re seeing refinancing numbers surge across the country.

In just two months we’ve seen the Reserve Bank of Australia (RBA) increase the cash rate from a record-low 0.10% to 0.85%, and it hasn’t taken long for most lenders to pass those rate increases on to customers.

Unfortunately, the RBA has warned that more rate hikes are on the way, which might have left you feeling at your lender’s mercy.

But there are ways you can make yourself feel more in control, including by doing what tens of thousands of mortgage holders around the country did in May: refinancing or asking their current lender for a better rate.

Homeowners are refinancing in droves

According to PEXA’s latest refinancing insights, refinancing increased by more than 20% in May (from April) across each of Australia’s four most populous states.

Here’s a quick breakdown:

NSW: 10,838 refinances. That’s up 20.8% on April, and up 15.6% year on year.

VIC: 11,500 refinances. May up 26.7% on April, and up 23.3% year on year.

QLD: 6,699 refinances. May up 21.8% on April, and up 49.6% year on year

WA: 3,244 refinances. May up 25% on April, and up 46.1% year on year

So why the big increase in refinancing?

Lenders now, more than ever, need to attract and retain borrowers.

So just because rates are going up, doesn’t mean you can’t scope out a better deal – especially if you have a decent amount of equity and a strong track record of meeting your mortgage repayments.

If that sounds like you: you’re a good customer. And lenders want good customers.

The other big reason for the recent surge in refinancing is that smaller lenders are stealing more and more borrowers away from the major banks with super-competitive rates.

In fact, in NSW, Victoria, Queensland and Western Australia combined, the major banks and their subsidiaries had a net loss of more than 5,000 borrowers to non-major lenders in May, according to PEXA.

Competition is fierce!

Why work with a broker now?

The amount of loans being written by brokers continues to grow.

In fact, brokers are currently writing 70% of all new home loans in the country – the biggest market share ever.

And as you know, brokers are loyal to you, not to any particular lender.

That means that if we think you can get a better deal elsewhere, we’ll encourage and help you to do so – not hope that you’ll stay put on your current rate.

And even if you don’t want to refinance with another lender, there’s always the option of asking your current bank to review your rate (and indicating that you’re prepared to refinance if they don’t come to the table).

So if you’d like to find out more about what options are available to you, get in touch with us today – we’d love to help you feel like you have some agency in the period ahead.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Fixed rates on the rise, as CommBank tips a June cash rate hike

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Hold onto your hats, things are about to get a little bumpy. Economists from Australia’s biggest bank are predicting the Reserve Bank will raise the official cash rate as early as June – and we’re already seeing fixed interest rates increase significantly.

Commonwealth Bank (CBA) economists have brought forward their forecasted Reserve Bank of Australia (RBA) cash rate hike from August to June, making it the earliest prediction amongst the big four banks.

We’ll go into more detail on why CBA has brought forward their prediction below, but first something a little more concrete: we’ve definitely noticed fixed rates trending up in recent months.

Fixed rate hikes

For example, back in November, for a $700,000 loan at 80% loan-to-value ratio, a two-year fixed rate with one particular lender was 1.84%.

That rate has since gone up to 3.04% – a staggering increase.

While not every lender has increased fixed rates so significantly, we are seeing them go up across the board.

So if you have been umming and ahhing about fixing your rate lately, you’ll want to get in touch with us sooner rather than later.

Because while most lenders have recently reduced their variable rates to compensate a little, with news now that the cash rate is being tipped to increase mid-year, you can expect variable rates to increase with the cash rate.

So why has CBA brought forward their forecast to June?

Ok, so back to CBA’s June cash-rate hike prediction and why they’ve brought it forward from August.

In a nutshell, CBA senior economist Gareth Aird is anticipating inflation to be a lot stronger than the RBA is forecasting.

As a result, Mr Aird believes this will lead to a rise in the cash rate to 0.25% at the June board meeting (currently it’s at a record-low 0.1%).

“We are very comfortable with our expectation that the quarter-one 2022 underlying inflation data will be a lot stronger than the RBA’s forecast,” explains Mr Aird.

And here’s the thing: it’s not the only cash rate hike CBA is predicting the RBA will make over the next 12 months.

Mr Aird is expecting a further three rate increases over 2022 to take the cash rate to 1%, with another move to 1.25% in early 2023.

That’s five cash rate hikes over 12 months!

Get in touch today to explore your options

Believe it or not, there are more than 1 million mortgage holders out there who have never experienced a rate rise (the last RBA cash rate hike was in November 2010).

And if the CBA’s prediction of five rate hikes over the next 12 months proves right, then some households will be in for a bumpy ride as they face hundreds of dollars in extra mortgage repayments each month.

So if you’re keen to act before the RBA increases the official cash rate, get in touch with us today. We’d love to sit down with you and help you work through your options in advance.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Open banking is ramping up, so how are lenders using your data?

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Open banking is here and it’s charging full steam ahead. So just how are lenders and fintechs using your shared data in this brave, new, data-fuelled world? A new report has shed some interesting insights.

With all that’s gone on over the past two years, one of the nation’s biggest banking overhauls in recent memory has slipped under the radar.

It’s called ‘open banking’, and it aims to allow you to easily and securely share your banking data with your bank’s competitors to make it more convenient for you to switch banks when you think you’ve found a better deal on a financial product.

For example, instead of spending hours and hours gathering documentation (such as bank statements, expenses, earnings and identification documents) to refinance your home loan, you could simply request that your current bank sends the info across for you.

But, like most things, it comes with a trade-off: you’ve got to share your banking data with the prospective lender, fintech or allied professional to make it happen.

So just how do they use your data?

Australian open banking provider Frollo has just published the second edition of its yearly industry report, The State of Open Banking 2021, which surveyed 131 professionals representing banks and lenders, fintechs, technology providers, and brokers across the country.

The report shows open banking data availability has accelerated dramatically.

In the first 10 months of 2021, 70 banks started sharing consumer data and 14 businesses became accredited data recipients – including three of the four big banks.

This is an increase from just five data holders and five data recipients in 2020.

And more financial institutions are getting ready to jump on board.

The industry survey shows 62% of respondents plan to use open banking data within the next 12 months, and 38% within the next 6 months.

So what are they using the open banking data for?

Well, the most popular uses can be grouped into three categories:

– Lending: income and expense verification is highly valued by 59% of survey respondents.

– Money management: multi-bank aggregation and personal finance management were highly valued by 50% of respondents.

– Verification: customer onboarding (49%), identity verification (38%), account verification (34%) and balance checks (30%) were all highly valued.

For open broking, get in touch

Now, it’s important to note that open banking isn’t the only way you can make life easier on yourself when it comes to switching up financial products.

That’s what we’re here for!

We’re an open book – always happy to check whether you can apply for a better deal on your home loan somewhere else.

And as you know, we pride ourselves on taking on the vast majority of the legwork, whether we’re harnessing the power of open banking or not.

So if you’d like to explore your options, get in touch today – we’d love to help you out!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Seismic shift: two major banks hike fixed interest rates

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Are the days of ultra-low fixed interest rates over? It’s looking increasingly so, with two major banks increasing their fixed rates this week. So if you’ve been thinking about fixing your mortgage lately, it could be time to consider doing so.

Do you know how when one tectonic plate shifts, others around it soon follow?

Well, in the past week, the Commonwealth Bank (CBA) and then Westpac hiked the interest rates on their 2-, 3-, 4- and 5-year fixed-rate home loans by 0.1% (for owner-occupiers paying principal and interest).

Meanwhile, ING also lifted its fixed rates on 2- to 5-year terms by 0.05% to 0.2%.

For mortgage-holders, it’s a clear ol’ rumbling sign that the days of super-low fixed interest rates are coming to an end.

So why are banks increasing fixed interest rates?

The Reserve Bank of Australia (RBA) has repeatedly insisted the official cash rate isn’t likely to rise until 2024 at the earliest.

But it seems the banks don’t believe them. The banks think it’ll happen sooner.

CBA, for example, is currently predicting the RBA will increase the official cash rate in May 2023, while Westpac is predicting a rate hike in March 2023 – both well before the RBA’s 2024 timeline.

Given that’s about 18 months away, the major banks are now adjusting the fixed rates on fixed terms of 2-years and longer, in order to head off the expected rise in their funding costs.

“Lenders are scrambling to lift fixed rates before they start to feel the margin squeeze,” explains Canstar finance expert Steve Mickenbecker.

“Borrowers shouldn’t be so complacent as they must expect rises inside two years, and the closer they get to that point, the less attractive the fixed rates alternative will be.

“They may want to consider fixing their interest rate for three years or longer, while the going is still good.”

Variable interest rates cut

Interestingly, a number of the banks – including CBA and ING – simultaneously slashed interest rates on some of their variable-rate home loans this week.

And CBA even cut their 1-year fixed rate by 0.1% (for owner-occupiers paying principal and interest).

So why did they do this when (longer-term) fixed rates are going up?

Well, aggressively competing for customers on variable-rate mortgages (and 1-year fixed) makes sense for lenders when a cash rate hike is predicted to be at least 18 months away.

They can always increase their variable rates when needed, but they can’t do the same for borrowers locked in on longer-term fixed-rate mortgages.

So what’s next?

As mentioned above, when the big banks make a move, it’s not uncommon for other lenders to follow suit – as seen with ING this week.

So if you’ve been on the fence about fixing your rate, it’s definitely worth getting in touch with us sooner rather than later.

We can run you through a number of different options, including fixing your interest rate for two, three, four or five years, or just fixing a part of your mortgage (but not all of it).

If you’d like to know more about this – or any other topics raised in this article – then please get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.