Festive period can be a great time for loan shopping
At this time of year, most people are focused more on shopping for gifts than on shopping for a home loan.
Fewer mortgages are sold during December and January than at other times of the year. The property market slows down and so does refinancing activity. Australian Bureau of Statistics data shows a regular dip each January in the value of mortgages sold for refinancing (see chart).
Many people stretch their budgets during the festive season and reviewing the home loan takes a back seat to spending.
Commonwealth Bank research released last month suggests more than half of people overspend during the holidays on gifts, travel, entertaining and shopping in the sales. While 57% set a budget for their spending between 1 December and 6 January, fewer than one in five stick to their plan, the research found.
For mortgage holders who are disciplined with their finances and prepared to set time aside to investigate their refinancing options, there are some attractive home loans available.
The official cash rate has remained steady at 2.5% for more than 18 months now and most economists expect rates to stay low throughout 2015.
Fewer than one in four economists surveyed by Finder.com.au in November expect rates to move before the middle of next year. Some 70% believe rates will change in the latter part of 2015 and a minority expect no increase until 2016. Three of the 37 economists surveyed think the next move will be down.
Borrowers have benefitted this year not only from the low interest rate environment but also from strong competition between lenders.
Heritage Bank cut its mortgage rate in late November and is now offering a variable mortgage with a comparison rate of 4.4% to people refinancing with a loan to value ratio of up to 80%. The bank is also waiving its $600 application fee for new loans taken out before Christmas.
Other lenders, such as loans.com.au, Australian Financial, MortgageView and Ubank, are also offering variable mortgages with comparison rates below 4.6%.
Fixed rates are available at competitive levels, such as the one and two-year fixed rate mortgage that Loans.com.au is offering at 4.57% and 4.59%, respectively.
Earlier in the year several lenders began offering non-rate incentives to lure borrowers to their products.
Many home owners have been taking advantage of the deals available. The value of mortgages refinanced rose sharply through 2014, ABS data shows. In July, the peak month for refinancing activity, almost $5.6 billion worth of mortgages were refinanced.
Mortgage holders have also been prudently paying down their debts. The Reserve Bank of Australia has noted that mortgage holders are, in aggregate, months ahead on their repayments, either as a result of paying early or holding balances in offset accounts.
Most households have manageable debt levels, with eight in 10 able to add to their savings or at least make ends meet, the St George-Melbourne Institute Household Financial Conditions Report released in late October showed.