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Home loan refinancing remains strong - what are your options?

Peter Terlato avatar
Peter Terlato
- 4 min read
Home loan refinancing remains strong - what are your options?

For the past two months, the cash rate has remained unchanged. As the RBA mulls the potential for another rate rise before the end of the year, Australian homeowners seeking lesser rates and lower monthly repayments may be considering refinancing.

The Australian Bureau of Statistics’ (ABS) latest lending indicators for June 2023 reveal the value of external refinancing (in seasonally adjusted terms) for total housing fell slightly (-3.1%) month-on-month to $20.2 billion, but remained higher (+12.2%) year-on-year.

Refinancing among owner-occupied housing slipped (-2.4%) month-on-month in June to $13.7 billion, but was higher (+11%) compared to a year ago.

Investor housing refinancing fell (-4.5%) to $6.4 billion month-on-month in June, but was 16.2% higher year-on-year.

While these figures don’t match May’s strong numbers, they confirm that home loan refinancing is still robust.

“Refinancing activity has remained at record highs in recent months, as borrowers continued to switch lenders amid interest rate rises,” ABS head of finance statistics Mish Tan said.

The ABS says external refinancing is when a new loan is obtained to replace an existing loan that was provided by a different lender. For housing, it includes refinancing an existing loan for the same residential property.

Refinancing (seasonally adjusted), values, Australia

Three of four big banks reduce serviceability

Australian Prudential Regulatory Authority (APRA) guidelines require authorised deposit-taking institutions (ADIs) to stress test all new residential mortgage applications - including refinancers - at a rate of 3% above the rate they applied for, to ensure that the borrower will be able to afford their repayments.

In May, Westpac began allowing select refinancers who didn’t meet the bank’s standard serviceability test to apply for a lower, modified serviceability assessment rate, provided that it exceeds the bank’s floor rate.

The Commonwealth Bank of Australia (CBA) followed suit in June. Then in early July, National Australia Bank (NAB) announced it would grant exceptions to rigorous stress-testing criteria for borrowers aiming to refinance. 

All three banks said these reduced serviceability buffers were not available to all refinancers and applicants must be evaluated on a case-by-case basis.

ANZ remains the only one of the big four not to change its stance. Addressing the House Standing Committee on Economics in Canberra last month, ANZ chief executive Shayne Elliott expressed support for the 3% serviceability buffer on residential loans mandated by APRA.

“Our latest figures were published in May and these showed that, while some customers are struggling, most are managing their way through the current financial pressures,” Elliott said.

“For example, only $6 of every $1,000 in our Australian home loans portfolio was overdue by more than 90 days. This is better than before the pandemic.”

What refinancing options are available?

Comparing your refinancing options can potentially help you to switch to a home loan with a reduced interest rate, cheaper monthly repayments and more desirable mortgage features.

Check out the tables below for some of the lowest rates listed on RateCity, covering a range of different homebuyers.

Owner occupied variable rate home loans:

LenderRateComparison Rate
Mortgage House5.39%5.43%
Arab Bank5.45%5.58%
First Option Bank5.49%5.49%
G&C Mutual Bank5.49%5.52%
Pacific Mortgage Group5.54%5.54%

Investor variable rate home loans:

LenderRateComparison Rate
First Option Bank5.74%5.77%
Easy Street5.79%5.84%
Bank Australia5.79%5.84%
Queensland Country Bank5.84%5.85%
Unloan5.89%5.80%

Owner occupied fixed-rate home loans:

LenderTermRateComparison Rate
The Capricornian1 year fixed5.45%6.88%
Australian Mutual Bank2 year fixed5.23%6.08%
Australian Mutual Bank3 year fixed5.33%5.84%
Qudos Bank4 year fixed5.84%5.85%
RACQ Bank5 year fixed5.34%6.11%

Investor fixed-rate home loans:

LenderTermRateComparison Rate
Macquarie Credit Union1 year fixed5.56%8.08%
Australian Mutual Bank2 year fixed5.53%6.57%
Australian Mutual Bank3 year fixed5.53%6.47%
Mortgage House4 year fixed6.09%6.80%
RACQ Bank5 year fixed5.54%6.48%

Source: All rates listed above are available on RateCity.com.au, and are accurate as of 07/08/2023.

Compare home loans in Australia

Product database updated 28 May, 2024