Refinancing your home loan will be much harder in 2019

Borrowers chasing better deals in 2019 need to get their finances in check as banks are clamping down on lending. Here’s how you can switch lenders and save.

Borrowers planning on getting a home loan or refinancing in 2019 will have their expenses forensically examined by wary lenders.

Financial institutions have drastically toughened the measures used to hand out loans which means more customers are likely to get knocked back.

Gateway Bank’s chief executive officer Paul Thomas blamed the financial services royal commission and intense scrutiny on banks for the severe clamping down on lending.

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Refinancing your home loan in 2019 is tipped to become much harder. Picture: Supplied

“I think the pendulum has swung too far … you could argue lenders over recent years have been conducting a light touch and perhaps it was too superficial,” he said.

He said analysing customers’ expenditure had “almost become forensic now”.

Banks have been known to reject customer applications based on their discretionary spending including dining out, shopping and even use of ride-sharing services such as Uber.

So for customers hunting down cheaper deals from rival lenders this year, refinancing won’t be as easy.

Mr Thomas said many borrowers could be left “shocked” when they applied for credit because the process had become “a lot more robust.”

Latest Australian Bureau of Statistics data showed in November 16,893 homes totalling $6.18 billion were refinanced.

The number of dwellings refinanced fell by 3.3 per cent compared to November 2017, and the average amount refinanced was $366,088.

But new independent research commissioned by Gateway Bank quizzed 1000 Australian mortgage customers and found 72 per cent were not afraid to shop around to get a better deal.

However, about 28 per cent have never bothered to see what other offers are available.

The Mortgage & Finance Association of Australia’s chief executive officer, Mike Felton, said the tightening lending environment meant shopping around was a “must have.”

“Now more than ever the consumer needs to be incredibly vigilant to what they are spending their money on and what is going through their credit card,” he said.

“Some banks are going through a customer’s credit card transactions for up to six months.

“If you have significant discretionary spending in the past six months and you don’t have the income to support affordability you are going to be knocked back.”

The research also found about 13 per cent of borrowers plan to refinance in the next six months and 28 per cent intend do so in the next year.

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REFINANCING TIPS

• Use comparison websites to compare costs.

• Look at the comparison rate which includes all the loan’s fees and charges.

• Work out what loan features are important, for example an offset account or split loan.

• The lowest rate loan may not be the best for you.

• Consider using a mortgage broker.