New research has revealed that the majority of mortgage-holders believe now is a good time to refinance their home but most of them are confused about refinancing.
The research report by Aussie, run in partnership with Lonergan Research, found that more than two-thirds (69 per cent) of mortgage-holders believe now is a good time to refinance their home loan as the coronavirus pandemic places financial pressure on households in meeting their mortgage repayments.
Among the different segments, 76 per cent of men said they think that now is a good time to refinance their home loan, compared with 63 per cent of women.
Meanwhile, 75 per cent of Millennials are more likely to believe that now is a good time, compared with 62 per cent of Gen Z, 67 per cent of Gen X, and 62 per cent of Baby Boomers.
Those who have refinanced their current home loan before are also more likely to think that now is a good time to refinance their home loan, with 79 per cent believing this to be the case, compared with 63 per cent of those who have never refinanced.
However, the report, titled Cutting through the confusion or refinancing, also found that more than three-quarters of respondents (78 per cent) are confused about what refinancing is. Just over a fifth (22 per cent) were able to identify correct examples of refinancing, without also choosing incorrect examples.
According to the report, which surveyed 1,058 mortgagors across Australia, 14 per cent of mortgage-holders said they don’t know what is classified as refinancing a home loan, while 13 per cent said that they do not know what refinancing is altogether.
The most common error mortgage-holders make when classifying refinancing is believing it is negotiating a lower repayment on their current home loan, with 36 per cent falling in this category.
Just over two-fifths (44 per cent) have not thought about refinancing, while a quarter said they have thought about it but have not looked into it yet.
Among those who do refinance, 42 per cent said they would be most likely to put the money they save into their offset account, and 35 per cent said they would save it for a rainy day or something specific.
Many respondents said they held back from refinancing for psychological reasons or complacency, such as not knowing where to start and feeling that the process is too hard.
42% of broker appointments about refinancing
Aussie CEO James Symond said that over the last month, 42 per cent of appointments with an Aussie broker were related to refinancing, “indicating that during uncertain times, there are options available and consumers want a broker to investigate if they have the right home loan for the current market conditions”.
“With COVID-19 placing households under pressure to meet their mortgage repayments, the RBA recently dropping the cash rate to a historical low of just 0.25 per cent and increasingly competitive products and rates, mortgage-holders recognise there are opportunities to get a better deal,” Mr Symond said.
In relation to the use of a mortgage broker, 83 per cent identified the benefits of using a broker to refinance their home loan, while 52 per cent of mortgage-holders believe brokers will help them find the best rate and 45 per cent believe brokers will let them understand their options.
Gen Zers are most likely to identify the benefits of using a broker, with 93 per cent doing so, while only 70 per cent of Baby Boomers are likely to see the upside in using a broker for refinancing.
Three-quarters of respondents have received information or advice on their current home loan through the person-to-person means, with 38 per cent going to brokers, while 24 per cent have spoken to someone at their current financial institution.
“The benefit of using a mortgage broker is that they are a specialist in home loans, they can outline what’s involved, guide you through the steps in detail, they know what’s available on the market, and can assess what you’re eligible for. In short, they can help take the complexity and confusion out of the process,” Mr Symond said.
[Related: Property buyer demand strong during COVID-19]