In 2023, the cashback craze was on steroids. Lenders vying for refinancing business were offering sweeteners of $5,000 or more to borrowers who switched over their home loans.
However, the wind forwards the clock to 2024 and the landscape is vastly different. Fewer and fewer lenders are offering cashbacks, and those who have reduced the amount they’re willing to hand over. The average cashback is now around $2,000.
So, has the refinance boom finished? Let’s take a look.
What happened in 2023?
Last year, we saw homeowners refinancing their home loans in record numbers. As interest rates soared, more and more borrowers decided to shop around in order to find a more competitive home loan.
The surge in refinances was no doubt driven by the amount of borrowers rolling off pandemic-era low fixed rate mortgages on to higher variable interest rates. Reserve Bank of Australia (RBA) data shows 880,000 borrowers came off fixed rates in 2023. Their repayments jumped significantly when this happened.
According to Australian Bureau of Statistics figures, monthly mortgage refinances peaked at $21.5 billion in July 2023. That was 21.8% higher compared to the year prior.
However, as the year progressed, refinancing started to slow down. By December 2023, the value of refinances had dropped to $17.1 billion.
What’s the outlook in 2024?
The number of fixed rate mortgages expiring is lower in 2024 compared to last year, which means the number of people refinancing may also slow down.
Having said that, there are still 450,000 fixed rate home loans set to expire in 2024, according to the RBA. If you fall into this category, it’s important to review your home loan early and ensure it still meets your needs
What happens if your fixed rate expires?
Usually, your home loan will revert to your bank’s standard variable rate once your fixed term is up. If that rate is higher than your fixed term rate, you may see your repayments jump significantly.
Why it pays to consider refinancing
Refinancing can help you achieve all sorts of goals, including:
- Finding a more competitive home loan
- Accessing interest-saving features like offset accounts and redraw facilities
- Using your equity to buy another property, renovate, or make another big-ticket purchase
- Consolidating your debt so that you can budget and manage your repayments more effectively.
Like to explore your options?
If you’re approaching the fixed-rate cliff, get in touch sooner rather than later to explore your options.
As your mortgage and finance broker, we can help you work out what your repayments would look like when you roll off your fixed rate on to a variable rate. We may be able to suggest other ways to prepare, like making extra repayments now as a buffer for when your fixed term ends.
In some instances, we may be able to negotiate a better rate with your current lender or suggest another bank with a more competitive home loan that better suits your needs.
We’re here to help, so get in touch today.