According to a recent poll of mortgage holders conducted by Advisor, a better rate is not the main reason why people choose to refinance their home loan.
Of the 290 respondents to the survey, majority claimed that consolidation of debts into their mortgage was the key reason for mortgage refinance.
More than one third of mortgage brokers interviewed, claim that debt consolidation was the number one reason for refinancing, while 29 per cent said refinance was undertaken for a better rate, and 25.9 per cent said it was to access home equity.
Clearly it is not merely about who offers the cheapest rate. Borrowers will chose a lender who will allow them to consolidate their unsecured debts into their mortgage. Even if the mortgage rate is a little higher, it is still possible to benefit overall from such a debt consolidation.
A lot of the refinance activity is now generated by the property investor segment of the Australian Property Market.
A more expensive loan which provides the borrower with flexibility can be more beneficial that a loan which is a little cheaper but does not allow equity access or debt consolidation.
Sometimes refinancing is unavoidable. There are many different types of clients that want to refinance. Young couple who want a cheaper rate as well as investors that are looking to purchase another propery.But while some brokers would prefer to avoid refinancing altogether, data from AFG shows refinancing activity is on the rise.
According to the latest data, refinancing activity made up 39.0 per cent of all AFG mortgages sold during the month of June – up from 35.7 per cent this time last year.