Competition gives borrowers stronger negotiating stance

Posted on 21/04/2011  

The latest home loan figures show a fall inactivity, but financial comparison website RateCity says home buyers and those who refinance their loans will benefit from growing competition in the lending market.

It also suggests flat property prices will draw first-home buyers back into the market.

The latest Housing Finance report from the ABS shows the number of home loans in February is the lowest since February 2001, at 45,393 (seasonally adjusted). This number fell 5.6% from January and is 7.2% below the level of 12 months ago. The market share of first-home buyers fell to 14.9%, the lowest level since June 2004.

However, RateCity notes that the number of borrowers refinancing their mortgage has risen 7.9% in the past 12 months.

Damian Smith, RateCity’s CEO, says: “2011 brings greater opportunity for bigger savings on home loans and it’s great to see higher numbers of borrowers refinancing compared to last year.”

Smith says the average standard variable rate is 2.55 percentage points higher than the official cash rate, but a wider range of rates means there’s more room for lenders to negotiate on home loans.

“If you don’t ask you’ll never get the biggest savings. Whether it’s a 10 basis point discount off your home loan rate or waived fees, every little bit helps and it can make a big difference to the overall cost of your mortgage.

“The difference between a variable rate of 7.10%and 7% on a $300,000 mortgage could be $6,000 over 25 years.”

Smith also suggests that increased household savings may give some first-home buyers a better starting position within 12months.

“The Australian Prudential Regulation Authority shows many Australians are saving more money, with almost $489 billion recorded by banks from deposits, up by $38 billion compared to 12 months ago.

“Some of these savings will be held by people who will enter the housing market for the first time in the coming two years.They will be in a much better position because of this – if first-home buyers can get a 15% deposit under their belt, they will have many more home loans open to them, and they’re much less exposed to movements in interest rates.”


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