Home loan activity picks up as rates remain on hold

It appears the pause in the cash rate provided a breather for many homebuyers seeking finance — figures from the Australian Bureau of Statistics (ABS) showed that the number of new owner-occupier loan commitments for dwellings increased month-on-month in August.

Over the month, the number financing commitments from the owner-occupier segment went up 2.5%. On an annual basis, however, the number was down 12.3%.

Since February 2023, the number of new owner-occupier loans seemed to have returned to levels seen before the pandemic began, well below the peak achieved in January 2021.

Based on value, the trend followed the same trend — the value of new owner-occupier financing went up 2.6% monthly but declined 12.5%.

Across the investor segment, the value of financing commitment increased 1.6% in August but were still down 3% from last year.

Meanwhile, the number of external refinancing among owner-occupiers fell 5.4% over the month — this followed the record-breaking activity in July 2023.

However, refinancing remained at “unprecedented levels” as household seek options amid a high interest rate environment.

Since May 2022, the cash rate has already increased 400bps, now at 4.10%. While the rate hikes have been on pause since July, the recent statement from the Reserve Bank of Australia point to further tightening unless targets on inflation are met on time.

Expert shares tips when negotiating

Many fixed-rate loans are still set to expire in the coming two years and existing borrowers are urged to explore strategies to help secure the best home loan rates when their fixed terms expire.

Zippy Financial director Louisa Sanghera said around 40% of fixed-rate loans outstanding in early 2022 will expire by the end of 2023 and a further 20% by the end of 2024.

“The rapid increase in interest rates since May last year means many existing borrowers are stuck with their current lenders, because they simply don’t qualify to refinance elsewhere at present,” she said.

“By being proactive and undertaking some simple research, existing borrowers can give themselves a better chance of securing a much better home loan rate.”

Ms Sanghera said it pays to do some research and know the best home loan rates currently in the market.

“Find the best rate in the market then take that rate to your bank and ask them to beat it,” she said.

Another good strategy is to speak to the right people — in this case, Ms Sanghera said borrowers must reach out to their lenders’ retention teams when renegotiating their loan terms.

“Always ask for the bank’s retention team directly as they have the best rates, rather than someone who may just be in the home loan call centre,” she said.

“If the rate they offer you is still underwhelming, don’t give up, and repeat the same process every six months.”

For borrowers who have already built-up significant equity, they can leverage on their loan-to-value ratios (LVRs) to get a better deal with their lenders.

“Lower LVRs do carry lower rates with lenders. So, if your property has gone up in value, you may qualify for a cheaper rate, so make sure you know your current LVR before calling,” she said.

If getting a lower rate is not possible, Ms Sanghera said borrowers can ask for other ways on how their lenders can help them.

“If they say they can’t lower the rate, then ask if they can waive the annual fee instead,” she said.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Important Information and Comparison Rate Warning

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