If the housing market is one favouring buyers, then the mortgage market is shaping up to be one favouring borrowers.
According to mortgage comparison website RateCity.com.au, competition between lenders for mortgage business is set to heat up in 2013, with annual home loan commitments forecast to return to levels last seen in 2000, meaning borrowers should be able to negotiate or switch lenders for a better deal.
RateCity.com.au says lenders are bracing themselves for one of the toughest years in 2013, and will have to boost their efforts to attract and retain borrowers.
The website bases this outlook on its analysis of ABS annual home loan commitment figures, which show a steep decline since peaking at just under 730,000 in 2007.
“During the global financial crisis, home loan commitments dipped to 599,070 in 2008 and the mortgage market never recovered with 2013 expected to have even fewer home loans financed,” says RateCity.com.au.
RateCity.com.au expects less than 600,000 home loans to be financed this year, and with mortgage rates expected to fall this will give added impetus for borrowers to consider refinancing, particularly if lenders don't pass on full rate cuts.
Anecdotally, the competition for mortgage lending appears to be already heating up, with Yellow Brick Road, fresh from its funding deal with Macquarie Bank, offering a 115-basis-point reduction off of its base rate under its Empower Home Loan offering – followed by up to 86 points off the base rate for the life of the loan.
- Bank of Melbourne is offering a 90-basis-point discount off of its standard variable rate home loan or portfolio loan over $500,000 until the end of January for those who take out a package deal.
- Bankwest is offering an 80-basis-point discount off the standard variable rate for the first three years of its Super Start Home Loan.
In addition, RAMS is not charging mortgage application fees until the end of the month.
Other lenders that have cut upfront fees on some home loans during the past six months include AMP Bank, Yellow Brick Road and Gateway Credit Union.
RateCity.com.au spokesperson Michelle Hutchison says the peak levels of home loan activity in 2007 are unlikely to return any time soon and borrowers should take advantage of competitive offers and the opportunity to negotiate as lenders fight for market share.
“Interest rates are expected to fall further, which means borrowers are less likely to refinance because their repayments will drop, despite significantly lower rates often available to those who compare home loans and switch."
"Fewer government incentives for first home buyers will also mean there’s less appeal to enter the market.”
“Some lenders are also offering no-deposit loans such as RAMS (offering up to 120% LVR) and the latest from SGE Credit Union (up to 100%) with conditions.
“More lenders need to work harder if they want to attract and retain their mortgage customers this year. Borrowers should take advantage of the exit fee ban and save more than a Reserve Bank rate cut by comparing deals at RateCity, renegotiating with your lender or switching,” she says.
For information on refinancing, watch our free webinar The Do's and Don’ts of Refinancing Your Existing Home Loan ... and How to Avoid Unnecessary Hurdles