Record low interest rates have failed to entice borrowers to refinance or enter theproperty market.
Michelle Hutchison from Rate City says that under 49,000 home loans were financed in April according to ABS which is 5% higher than March and 17% more than April 2012, but still lower than it used to be when the number of loans financed was around 50 to 60,000 per month. That was between 2001 and 2009.
So are more people taking advantage of fixed home loans?
Well more borrowers are fixing but they only made up about 1 in 5 of all home loans financed so you would have to say most borrowers are still favouring variable rates.
Those fixing, is rising as I said and in fact the present numbers are at 5 year highs, but it’s not as high as the peak of borrowers fixing their home loans during the GFC in 2007 when we saw over 25% of home loans being fixed.
As I go on my morning walk I notice a lot more home owners improving on instead of moving so what about existing borrowers refinancing to renovate and add on to their existing property? Rate City tell me that refinanced loans made up 32% of all loans financed in April, which was slightly more than March but lower than most months of the past few years.
So what’s happening?
Well it appears that when interest rates fall borrowers tend to become complacent with the savings they receive on those reduced rates. This is a good time to consider re-financing because lenders are still desperate for new customers and interest rates are still very low. For example, two-year fixed rates have fallen by 34 basis points on average since January and are still lower than variable rates.
Remember every 25 basis points you save on your mortgage is worth about $50 per month on a $300,000 home loan. You do the sums.