Professionals Real Estate The latest ABS figures for home lending in Western Australia show that during November 2010, the value of loans refinanced by established home owners topped $469 million, the highest figure for home loan refinancing since July 2009.
According to Rob Rooke, Managing Director of Professionals Finance, the refinancing of home loans is set to become a major issue in the property market during 2011.
“Over the past year, the refinancing of established home loans in WA has increased from around $300 million per month to more than $400 million per month. In contrast, the value of new home loans taken out by property owners in WA has fallen over the year from around $1.6 billion to $1.3 billion as the overall property market has slowed. Existing property owners are now seeking to get the best value for money through refinancing their mortgages because of rising interest rates over the last 12 months. In particular, higher interest rates imposed by the big four banks above and beyond those set by the RBA are encouraging more home owners to look for more competitive interest rates. This coupled with reduced mortgage lending across the market and the need for banks to satisfy their shareholders and other stakeholders is seeing competition between the banks for market share returning and set to increase. Overall, this is a positive development for the Western Australian property market because greater competition means that property buyers have a greater choice of lenders and this will enable more people to purchase a home. In addition to assisting more first home buyers to purchase a home, greater competition in the lending sector will also allow existing property owners to take out larger home loans and upgrade their property. Professionals also expect that the number of property owners refinancing their home loans will increase significantly in Western Australia during 2011 as a result of this greater level of competition in the finance sector,” he said.
Mr Rooke outlined the following issues that property owners should consider if they are planning to change their lender in the near future:
- If you are considering refinancing your home loan, it might be worthwhile looking at your overall financial position. For example, if you have significant personal debts these could be refinanced as part of the home loan at a much lower monthly interest rate.
- Check the break costs of your existing home loan. If you have enjoyed a discounted home loan rate for a short period of time (honeymoon rate) then there could be penalties for breaking the home loan contract. The breaking costs of the existing home loan may be greater than the savings from moving to a new home loan provider.
- Consider speaking to a qualified mortgage broker about a home loan product that might be more appropriate to your personal circumstances. Financial institutions are constantly bringing new products into the market and they may have launched a new product.
- Your mortgage broker can also advise on the fine print of any new home loan products being offered; you may find that there may be establishment fees and longer-term higher interest rates under the terms of a new home loan contract.
- If you have a number of home loans, it may be worth consolidating these loans with one lender who will offer a discounted home loan rate as well as additional features if the combined amount is above a certain level of borrowings ie. $250,000.
- Decide which features are really important when choosing a home loan. Additional facilities such as offset accounts or line of credit may carry additional costs. However, if you want a ‘no frills’ loan with a low interest rate then consider choosing a budget style variable home loan product.
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