Home loan refinancing levels surged to $24 billion in May

The value of home loans refinanced by Australian mortgage holders has reached its highest level in years according to new figures from the Australian Bureau of Statistics (ABS).

Released last Friday as part of the Bureau's monthly lending indicators, the data shows that, in total, $24 billion worth of home loans were refinanced during May which, as the graph below shows, is the largest amount in more than two years. 

The bulk of the switching ($15.9 billion) was done by owner occupiers who, as a group, refinanced $2.3 billion more than they did in April, with an average loan size of $454,121.

Investors also proved motivated to refinance their loans in May, switching $8.19 billion worth of loans which was a month-on-month increase of $1.4 billion.

What’s behind all this refinancing? There are a number of possible motivators for mortgage holders, though one of the major factors is likely to be low home loan rates.

While 4 and 5-year fixed rate terms have started to tick up in recent months as lenders have adjusted their rate outlooks, shorter term fixed rates and variable rates are at some of the lowest levels they’ve been in years. 

In fact, the average variable rates^^ in the Mozo database for both owner occupiers and investors have recently dropped to the lowest points they’ve been since we started tracking them in January 2015. Currently they’re sitting at:

• 3.22%: For owner occupiers making principal and interest repayments

• 3.63%: For investors making principal and interest repayments

And those are just the averages! There are now over 50 lenders in our database with at least one variable rate home loan on offer to owner occupiers with a headline rate below 2.50%.

So for borrowers who haven’t refinanced their loan to a lower rate in recent years, what kind of savings could be on offer? Here’s an example.

Let’s say homeowners Ava and Marc want to refinance their $400,000 loan (OO, <80% LVR), on which they’re making principal and interest repayments. Their current lender is charging them a variable rate of 3.22%, so they’re looking to make the switch to a new lender offering a rate of 2.50%.

According to our home loan repayments calculator the couple would not only be able to reduce their monthly repayments by $143, they’d save $34,341 in total interest over a 20-year period.

RELATED: $3,000 cashback: ING unveils new incentive for home loan refinancers

Past time that you checked in to see how your own home loan rate measures up? Start comparing rates today with our handy refinance home loans comparison table, or check out some of the great offers available to refinances from the lenders below.

^^Average variable home loan rates come from loans tracked in the Mozo database and are based on a $400,000 loan amount and 80% loan-to-value ratio. For more averages and figures, check out our home loan statistics page.