Australian borrowers increasingly switch banks for refinancing

More home loan customers are looking for cheaper deals as refinancing rates increase. This trend is happening because interest rates are starting to lower. Recently, the Reserve Bank of Australia (RBA) cut interest rates for the first time in four years. This change has encouraged some borrowers to switch from their banks to competitors. Data from PEXA, which tracks property refinancing in Australia, shows a rise in refinancing deals in both February and March after the rate cut. In February, refinancing increased by 8.4% compared to the same month last year. While this is below the record highs of 2023, it is still above pre-COVID levels. Analysts expect this trend to continue if rates drop further. Julie Toth, chief economist at PEXA, noted that many people quickly respond to rate changes by looking for better loan options. Results varied across Australia. Western Australia saw a 29% increase in refinancing, while Queensland and South Australia had increases of 16% and 14%, respectively. New South Wales experienced a 4% rise, but Victoria saw a slight decline of 1%. Falling interest rates not only attract borrowers but also increase competition among banks. Last week, Westpac lowered its offer to new borrowers to 5.84%, matching the lowest advertised rate among major banks. However, existing borrowers are not affected by this change. Analysts say that competition has slowed down since 2023 but may be starting to pick up again. Matthew Wilson from Jarden noted recent moves by banks like Westpac, which suggest renewed competition. Canstar's Sally Tindall also mentioned that rate changes often lead customers to reconsider their mortgage options. In 2024, over $206 billion worth of loans were refinanced, showing that refinancing remains popular even without changes in rates. Big banks are mainly offering lower rates on digital loans, which are cheaper for them to process. Tindall pointed out that major banks are competing for digital customers, but only those willing to apply online.