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What you need to know about refinancing in 2020

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Finances, at a macro and micro level, have never been as important to Australians as they are today.

As a result, at Lendi we’ve witnessed a huge surge in refinance activity in recent months.

Our team of experts decided to deep dive into the stats, looking at owner occupier loans settled on the Lendi platform over the first six months of 2020 to reveal five key insights every homeowner should know.

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Here are our top 5 insights for homeowners in 2020:

1. Interest rates charged by Big 4 Banks continue to be higher than non-big 4 banks

Our study of owner occupier loans settled by Lendi over the first six months of 2020 shows that median interest rates charged by the likes of NAB, CBA, ANZ and Westpac were, on average, 8 basis points (bps) higher than the other banks.

The premium on big four interest rates peaked for loans settled in March at 12 bps higher than the others.

With the rising competition in the home loan market, even the big four banks have revised their offers. Banks, big and small, are now competing to secure good customers from a growing refinance market and a smaller pool of new purchase customers.

From the big four, we've seen cashback offers and record low fixed rates. In fact, their median rates were 20 bps lower for loans settled in April, when compared to March. In April, they were even undercutting the smaller lenders slightly.

However, we witnessed a return to the status quo in the last few months as competition intensified and smaller lenders ended June with lower median rates.

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2. It takes longer to refinance your loan with the big four banks

The big four banks took significantly longer to process loans for customers.

During the first half of 2020, the average time to refinance your loan with the big four banks was 54 days, as opposed to 36 days with non big four lenders.

If you are thinking about refinancing and need the process to be done quickly, it might be worth exploring options with smaller lenders.

3. By refinancing, you can save on average $2295 a year

Lendi data shows homeowners were able to reduce the interest rate on their owner occupier home loans by an average of 96 bps by refinancing during the first half of 2020.

On a loan of $407,000 this represents an annual saving of $2,295.

That’s $2,295 in unnecessary interest payments you’re putting into the banks’ pockets every year. In the current economic climate, it’s important to keep on top of your finances and cut unnecessary spending where possible.

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4. Banks slow to discharge loans is costing Aussie homeowners

When you refinance your home loan, a mortgage release or discharge needs to be recorded to legally release your current lender from mortgage obligations.

Although our data shows that the discharge time can be anywhere between 5 to 25 days, lenders take on average 16 business days to discharge a loan before a customer can refinance.

A slow discharge time is not only frustrating for the customer, it also foregoes savings on interest repayments whilst waiting for the discharge request to be approved by their outgoing lender.

Our analysis of ABS data shows over $2.7 million in interest savings were left on the table by homeowners during the discharge process in May alone.

5. Even before social distancing Australians were embracing online home loan processes

Even prior to the pandemic, here at Lendi we were seeing an increasing number of borrowers embracing the online home loan process.

But with social distancing and lockdown measures in place, we have noticed a significant shift towards online home loan applications.

Lendi saw an increase of over 50 per cent in the volume of loans settled on its platform in the three months to the end of June 2020, when compared to the same time last year.

If you are a homeowner who hasn’t reviewed their rates in the last 6 to 12 months, now is the perfect time to do it. You can review your current home loan interest rate here.

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Got a home loan question? Just ask!

We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: interest rate, refinance, big 4 banks, saving, application form, home loan

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856, Credit Representative 518849), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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