Borrowers rush to refinance

Homeowners who have watched their mortgage rates rapidly increase in recent months are jumping ship to new lenders in record numbers, according to refinancing figures compiled by the Australian Bureau of Statistics (ABS).

Borrowers refinanced $19.4 billion worth of loans in November and $19.1 billion in December – the two highest months yet recorded by the ABS.

In fact, more than $210 billion was refinanced throughout 2022, which was nearly $30 billion more than in 2021.

The Reserve Bank’s successive interest rate hikes, starting in May 2022, have largely been passed on by banks and lenders, and many mortgage holders have watched their repayments jump by hundreds of dollars a month.

Add to that the soaring costs in other areas of life and it’s hardly surprising that households are making every effort to save, according to Claire Frawley, personal finance expert at the Mozo comparison site.

“The rising cost of living and interest rates has created a perfect storm in most household budgets, and borrowers are refinancing to lower one of their biggest expenditures, their monthly mortgage repayments,” she says.

“Many people see refinancing as a massive hassle, but it could be time well spent. For example, a borrower with a $600,000 loan could save $253 a month by refinancing from a variable rate of 6% to a lower rate of 5.40%, which adds up to $3036 a year.”

Mortgages refinanced

2018 $109.5 billion 2019 $107.8 billion 2020 $140.2 billion 2021 $181.5 billion 2023 $210.9 billion Source: ABS