Homeowners Refinancing More Due to High Interest Rates

Interest rates are at their highest in 12 years, leading many homeowners to refinance their mortgages to reduce financial stress. Recent data shows a growing trend of people choosing to refinance with their current lenders rather than switching to new ones.

The Reserve Bank of Australia (RBA) recently kept its cash rate at 4.35%, a level not seen since 2012. This has put much pressure on mortgage holders, prompting many to look for ways to lower their monthly payments. Refinancing, which means replacing an existing mortgage with a new one under different terms, is becoming popular to ease financial strain.

In 2023, refinancing of home loans increased by 13.8%, showing that more people are choosing this option. A study reported a 24% rise in borrowers refinancing with their current lenders. Experts suggest borrowers use this trend to their advantage by being strategic with their loan repayments.

One strategy is to submit a discharge form to your current lender, indicating that you plan to move your mortgage. This may prompt the lender to offer better terms to keep your business. Having rates from other lenders ready can help you negotiate a better deal.

This approach works particularly well for larger loans. For example, refinancing an $800,000 loan could save you $49 a month or $588 a year if you switch from an average existing rate of 6.37% to a new rate of 6.27%. With more aggressive negotiation, you might save $99 monthly or $1,188 annually.

While many borrowers know the benefits of refinancing, loyalty to current lenders remains strong. About 42% of refinancing was done with existing lenders while refinancing with new lenders dropped by 11% over the year.

Banks are eager to keep their current customers and attract new ones, so now is a good time to negotiate. Speaking with a broker can help, as they know which lenders will likely offer the best deals.

As interest rates continue to rise, refinancing with current lenders is expected to become more common, helping borrowers manage their mortgage payments and secure better terms.

Conclusion 

With rising interest rates, more homeowners are refinancing to improve their financial situation. Many prefer to stay with their current lenders for better terms. Negotiating with your current lender, especially for larger loans, can often result in better deals. This trend will likely grow as people seek ways to manage high interest rates. 

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