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Refinancing surged in March and April as the rate-easing cycle prompted mortgage holders to seek out more competitive deals, according to new data.
Borrowers are switching lenders in growing numbers, with mortgage brokerage Loan Market reporting a 63 per cent spike in refinancing activity in March, sparked by the Reserve Bank of Australia’s (RBA) February rate cut.
Loan Market data has shown that March signalled the start of a refinancing rush, with the trend continuing into April (when volumes were 40 per cent higher year on year).
With the market widely expecting the RBA to lower the cash rate by 25 bps today (20 May), Loan Market CEO David McQueen said borrowers will keep looking for better rates as more of them become eligible to refinance.
“Customers have been shopping around for better outcomes and this will only increase after the RBA meeting,” McQueen said.
“History shows us that many lenders don’t always pass on the full cut, and even those that do may not offer their most competitive rate to existing customers.
“Borrowers are fed-up with paying the lender loyalty tax. They know there is plenty of competition out there and aren’t afraid to shop around for a lower rate.”
McQueen said that if the RBA cuts the cash rate by an expected 25 bps, the potential savings for borrowers could be significant.
“For example, a borrower with a $750,000 home loan on a 30-year term at 6 per cent p.a. could now see that rate fall to 5.5 per cent p.a. following both cuts. That drop alone would deliver more than $3,500 in interest savings in the first year if the borrower is making fortnightly repayments,” McQueen said.
While the rate cuts have been accelerating refinancing demand, separate data from the Commonwealth Bank of Australia (CBA) has shown that most mortgagors are holding their repayments at existing levels.
According to the major bank, the majority of variable rate home loan customers left their direct debit repayments unchanged following the February 2025 rate cut.
The 25-bp rate reduction could have saved customers up to $80 a month (for customers making principal and interest repayments on an average loan of $500,000).
However, CBA’s data showed that just 14 per cent of eligible home loan customers reduced their home loan direct debit repayments when their interest rates dropped in order to free up cash flow. Of those who did, more than 95 per cent of customers did so via the CommBank app or NetBank “in just minutes” (with the remainder either calling or visiting a branch).
CBA’s home buying executive general manager, Michael Baumann, said: “Home owners appreciate the flexibility to make financial choices that suit their current and future goals and we offer eligible home loan customers the option to reduce their direct debit repayments or leave it untouched.
“For those who did not reduce their direct debit repayments, they may now be making additional repayments on their mortgage, which could help them to pay off their loan faster.
“These additional payments will also increase the available balance of their loan accounts and customers may have the flexibility to redraw the available balance at any time, for example if they experience an unexpected cost.”
However, looking ahead, Baumann said he expected more borrowers to reduce their repayments, particularly if the cash rate continues to fall.
“If rates fall further, it could deliver greater total savings to eligible home loan customers,” he said.
“As such, I wouldn’t be surprised to see more home loan customers choosing to free up their cash flow by lowering their regular mortgage repayments.”
[Related: Market widely expecting 25-bp rate cut today]
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