One in two new home owners looking to refinance: LJ Hooker

Nearly one in two (46%) home owners who entered the property market less than two years ago is looking to refinance their mortgage, according to LJ Hooker Finance.

Recent home owners are more than twice as eager then the market as whole – 22% of the more than 1,000 active property participants polled by Galaxy Research on behalf of LJ Hooker Finance said they were looking to refinance their home loan in the near future.

The survey was carried out in September 2011, before the interest rate cuts of November and December and independent rate increases announced by banks this month.

Financial products comparison website RateCity.com.au recorded a 50% increase in home loan traffic in the first two weeks in February compared with the whole month of January, indicating that the appetite for refinancing might have risen even higher than levels recorded by LJ Hooker Finance in the latter half of 2011.

LJ Hooker CEO Janusz Hooker says the RBA’s decision to hold the cash rate in February should encourage consumers to review their financial situation and plan for the year ahead.

"After the 2011 interest rate cuts, home owners are closely watching the market to see what will happen next. Our research has shown that new home owners are concerned about interest rates and are very much aware that a spike in the cost of living could affect their home loan repayments,” says Hooker.

Of those planning to refinance their home loans, 20% cite interest rates as their primary concern, with a further 17% need to refinance to consolidate their debts.

The survey indicates that homeowners are concerned about the rising cost of living with almost half (42%) of those surveyed claimed they were living within their means but felt that an unexpected large bill would put pressure on their finances.

"Although Australians are taking steps to ensure that they are meeting their financial commitments, new home owners are clearly feeling increased pressure to stay on top of bills and mortgage payments," says Hooker.

Not all home owners are considering refinancing due to money worries.

Almost one-third (32%) of those looking to refinance were hoping to purchase a second, or investment, property, while a further 14% believe there are better home deals available.

Paul Ryan, CEO of non-bank lender Intouch Finance, says he is growing frustrated at the “spin” being put out by the major banks who continue to “cry poor” while “enjoying record profits”.

“Ultimately it’s up to the consumer to hold the banks accountable.  In the last two weeks we’ve seen an increase in rates coupled with the announcement of major job losses.  I want consumers to know that there are other options and smaller lenders who are offering cheaper rates and make service an absolute priority of their business,” says Ryan. 

Intouch Finance offers a standard variable rate of 6.7%, which is 61 basis points below that of NAB’s 7.31% standard variable rate, the lowest of the big four banks and 76 basis points lower than Westpac, which has the highest standard variable rate of the big four. 

Ryan estimates that on a $300,000 loan over 30 years, an Intouch Finance borrower would be saving $153.60 per month or $55,000 over the life of the loan compared with the Westpac customer and $122.92 per month or $44,0000 over the life of the loan compared with a NAB customer. 

“Don’t fall for the big four crying poor ” says Ryan.  “Get on the phone, get some quotes and then call your bank to find out what it’s prepared to do to keep your business.  If the answer’s nothing, then maybe it really is time to make a change.”

To find out all you need to know about refinancing your mortgage, sign up for Property Observer’s free webinar hosted by Mortgage and Finance Association of Australia chief executive Phil Naylor tomorrow at 12.30pm: The Do's and Don’ts of Refinancing Your Existing Home Loan ... and How to Avoid Unnecessary Hurdles

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