In 2023, Lenders went crazy with some cashback offers over $5,000 to buy your business!
Fast forward to 2024, and the financial landscape has undergone significant changes. The allure of cashback offers from lenders, once abundant, is now waning and the few that are still offering such incentives have scaled back. The average cashback hovering around $2,000.
So, does this signal the end of the refinance boom? Let’s take a look.
Reflecting on 2023
The previous year witnessed a surge in homeowners refinancing their mortgages at an unprecedented rate. As interest rates climbed, an increasing number of borrowers sought better deals by exploring alternative home loan options.
This spike in refinancing activity can be attributed to many borrowers transitioning from pandemic-era low fixed-rate mortgages to higher variable interest rates. According to data from the Reserve Bank of Australia (RBA), a staggering 880,000 borrowers shifted away from fixed rates in 2023, leading to significant increases in their repayments.
The Australian Bureau of Statistics reported a peak in monthly mortgage refinances at $21.5 billion in July 2023, marking a 21.8% increase compared to the previous year. However, as the year progressed, the fervor for refinancing began to subside, with the value dropping to $17.1 billion by December 2023.
What lies ahead in 2024?
The outlook for 2024 suggests a decline in the number of fixed-rate mortgages reaching expiration compared to the previous year. This could potentially result in a slowdown in the overall pace of refinancing.
Nevertheless, the Reserve Bank of Australia indicates that around 450,000 fixed-rate home loans are set to expire in 2024. For those falling into this category, it is crucial to proactively review and assess your home loan, ensuring it aligns with your current 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.