Sophie Elsworth | News Limited | February 20, 2012
First-home owners are on the hunt to refinance their mortgage within two years of entering the market, a new report says.
Research by LJ Hooker Finance has found 46 per cent of first-home owners are looking for better deals despite only being in the property market for a short time.
LJ Hooker head of finance Peter Bromley says the survey of more than 1000 people found property market beginners often opt for the easiest option when buying, then later want to refinance.
“(Their mortgage) is probably through their parents’ bank… they go where they find the opportunity,” he says.
LJ Hooker found more than one in five people active in the market are looking to refinance their home in the near future.
Bromley says this is often a result of personal circumstances changing, and says it’s important to shop around.
“With interest rates and a home loan, which is probably the biggest part of their income every month, it sometimes gets up to 50 or 60 per cent of their total income,” he says.
Twenty per cent of people refinancing say interest rates are their main concern, while 17 per cent are refinancing to consolidate debts.
ING Direct’s director of products, John Arnott, says it is vital customers are comfortable with their mortgage deal but they should be careful before switching.
“It’s important they don’t get lured in by what I would say are probably short-term carrots,” he says.
“There’s a lot of aggressive pricing at the moment and it’s important they don’t get lured in by those deals,” Arnott says.
He says lenders mortgage insurance, which applies to anyone borrowing more than 80 per cent of the purchase price, is “not portable” when you make the switch.
“The customer should look at the total picture,” he says.
“Above all, they should be looking at whether they are getting long-term value from switching. A lot of offers are very short term.”
Suncorp Bank’s executive manager of personal lending, Tony Meredith, says the abolishment of mortgage exit fees gave people more control.
“That certainly helps the customer in terms of their ability to refinance,” he says.
“As of July 1 last year, if you take out a loan, you generally don’t take out an exit fee.”