By Terry Ryder, 22nd May 2012
Lenders can expect more borrowers to desert them, following ABS figures that show the largest number of refinanced home loans in four years.
March produced the second successive monthly high of refinanced loans as a percentage of total home loans.
There were 17,756 refinanced home loans in March, which was the biggest number of refinanced home loans in one month since April 2008.
Financial comparison website RateCity says 37% of home loans financed in March were borrowers who refinanced from one lender to another. There was also a 19% increase in refinanced home loans for the 12 months to March 2012, compared to the previous 12 months.
RateCity says banks should expect more borrowers to jump ship.
Spokesperson Michelle Hutchison says: “While there’s still a lot of work to do to make switching easier, it’s clear borrowers are far more comfortable switching their home loan than ever before - and the ban on exit fees for new variable rate loans since July 2011 must be playing a part.
“We believe we’re only beginning to see the very start of the impact of these changes and it’s likely that more borrowers will switch lenders more often than in the past.”
On a state-by-state level, NSW borrowers were the most active switchers in March, with 41% out of all loans financed ditching their lenders for better deals. Victoria followed with 38%.
Hutchison says lenders will have to get used to more borrowers switching and will need to work on customer retention strategies if they want to keep their borrowers.
“The key here is that the savings from negotiating a better deal are much larger than the savings due to Reserve Bank of Australia-led rate changes. For instance, switching a $300,000 mortgage at 7% to 6.5% could save a borrower $100 each month or $36,000 over 30 years (excluding upfront costs and other associated fees).
"We believe many borrowers who have taken out a variable home loan since July 2011 will switch lenders within the first five years. Switching home loans will be far more common very soon and lenders need to work harder at keeping their customers with better customer service, more competitive deals and negotiating on their home loans."
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