Almost 30 per cent of borrowers are looking to refinance their mortgage in the coming year, with customers left “in the dark” by their financial institution, according to the CEO of a non-major lender.
New findings from a study released by Gateway Bank, which involved a survey of 1,000 borrowers, has revealed that 72 per cent of mortgage holders are open to the option of refinancing their home loan, with 10 per cent actively on the hunt for a new deal.
Moreover, 13 per cent of borrowers are looking to refinance in the next six months, with an additional 28 per cent intending to do so in the next 12 months.
Gateway’s research is in line with Housing Finance data from the Australian Bureau of Statistics (ABS), which revealed that the total value of refinanced loans increased 2.7 per cent in the year to 31 October 2018.
Paul Thomas, CEO at Gateway Bank, said that heightened competition in the mortgage market, tighter household budgets, and scrutiny from the financial services royal commission have triggered growth in demand for refinancing.
Mr Thomas also attribute the rise to a continued “front-book” focus from most financial institutions.
“These results should act as a wake-up call for the major banks,” the Gateway CEO said.
“A majority of financial institutions are focused on growing the front book, leaving existing home loan customers in the dark.
“We shouldn’t be neglecting customers once they’re in the loan book – retention should be just as important as procurement.”
Mr Thomas also encouraged borrowers to remain proactive to ensure they’re getting the best home loan deal but warned that refinancing to a lower interest rate may not always be in the best interest of mortgage holders.
“Consumers should consider whether or not refinancing to another product will be worth their while,” he said.
“Many Aussies make the mistake of blindly following a lower rate, failing to realise that these products aren’t necessarily tailored to their financial situation.
“Before jumping in head first, make sure to read up on the features of the new product, while taking into consideration the costs involved with refinancing, including break fees and upfront establishment fees.”