Mortgage Choice and Smartline CEO Susan Mitchell said the Reserve Bank of Australia‘s (RBA) decision to keep the nation’s official cash rate on hold at 0.1 per cent will continue the increasing trend of refinancing.
The RBA made the decision against a backdrop of climbing COVID-19 cases, lockdowns and a deteriorating economic outlook, according to Mortgage Choice CEO Susan Mitchell.
“The uncertainty caused by the ongoing lockdowns is pushing borrowers to chase better deals on their home loan,” Ms Mitchell said.
“Loan preference data is showing that borrowers are seeking certainty in their monthly home loan repayments.
“Mortgage Choice monthly approval data reveals a growing trend towards fixed rates, with the proportion of borrowers opting to fix part of their mortgage steadily increasing throughout 2021. In August, 41 per cent of all loans approved had a fixed component.”
Ms Mitchell went on to explain the loan approval data also showed a growing trend towards refinancing from March this year, with 42 per cent of loans for the purpose of refinancing.
“This is slightly higher than 12 months ago where 41 per cent of loans were for the purpose of refinancing,” she said.
Ms Mitchell noted this refinancing trend is also reflected in the latest housing finance data from the Australian Bureau of Statistics (ABS).
ABS data revealed that while new lending commitments slowed in July 2021, there was record growth in refinancing commitments over the month.
“Lockdowns in the nation’s two largest housing markets will likely put downward pressure on already constrained supply this Spring housing season,” Ms Mitchell said.
Realestate.com.au economist, Paul Ryan added buyer demand has remained very high.
“There’s a lot of people on realestate.com.au that are in the serious stages of buying and that hasn’t really abated in these lockdowns, but what we have seen is seller activity has diminished,” Mr Ryan said.
“A lot of sellers are reluctant to list their homes when they can’t have a proper selling campaign and viewing inspections…and that’s primarily affecting Sydney and Melbourne at the moment, but there is also some residual uncertainty in other parts of the country.
“While COVID-19 restrictions remain in place, housing market activity will continue to be subdued, but I see this as only a delay. So it’s a pause rather than a hibernation.”
Ms Mitchell urged borrowers to review their home loans, even though there hasn’t been marked changes to interest rates.
“The home loan market is very competitive, so you could be missing out on a better deal if you don’t shop around. A broker can easily compare your loan to thousands of products on the market to ensure you’re getting the best deal for your needs,” Ms Mitchell said.
Summary of the RBA’s decisions
- Maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent
- Maintain the target of 10 basis points for the April 2024 Australian Government bond
- Purchase government securities at the rate of $4 billion a week and to continue the purchases at this rate until at least mid February 2022
