Refinancing levels highest in NSW as homeowners push their lenders for best rates

Australian borrowers being hit by rapidly rising rates are looking to get the best deal from their lenders or looking elsewhere, with NSW homeowners proving ready to make the switch.

Refinancing is highest in Sydney. Picture: NCA Newswire / Christian Gilles

Homeowners with ballooning mortgage repayments are increasingly looking to score a better deal from their bank rather than switch lenders, with NSW emerging as the refinancing capital of the nation.

Data from online lending platform Lendi shows $422.53m worth of home loans in NSW have changed lenders since the start of the year, representing 49 per cent of refinancing activity around the country.

This compared with $163.28m worth of loans in Queensland and $158.29m in Victoria over the same period, each representing around a fifth of activity. South Australia recorded a 5.6 per cent share of refinancing and Tasmania 2.1 per cent. Each of the territories recorded less than 1 per cent of activity. No data was provided for Western Australia.

Lendi Group’s general manager of distribution Brad Cramb said of those refinancing with the platform, less than half (49 per cent) are choosing to go with a big four banks, despite the major lenders battling to attract new business with frequent flyer and cashback offers.

“There has also been an increase in people looking to refinance with their existing lender,” Mr Cramb said.

“We’ve seen in the six months to February 2023 a 200 per cent rise in same-lender refinance.

“Those mortgage holders (achieve) an average saving through a broker-originated refinance of 68 basis points (0.68 per cent) on their loan.”

Data from the Australian Bureau of Statistics shows total refinancing is at record highs, with the value of loans changing hands totalling $18.6bn in January.

The Reserve Bank decided on Tuesday to lift the cash rate 0.25 per cent to 3.6 per cent, the highest level since 2012.

SQM Research managing director Louis Christopher said he believed the RBA would implement another rate rise next month, followed by a May pause.

He said it will be “crunch time” for borrowers as cost-of-­living pressures bite: “It will be extremely painful for many.”

On the ground in the mortgage belt of Western Sydney where the pain of rate rises in being felt the hardest, broker Kim Horan said even refinancing is becoming increasingly difficult.

The Aussie Home Loan St. Mary’s principal explained that the serviceability buffer of 3 per cent – used to assess a borrower’s ability to pay back a loan – is shrinking homeowners’ capacity and making it harder to get a competitive rate.

“We’ve been able to assist some households in these situations by consolidating their liabilities, which can also help to relieve cashflow pressure,” Ms Horan said.

The big four banks have passed on the latest increase in full to mortgage customers.