Things are looking healthier for borrowers these days thanks to a couple of the major banks and a number of other lenders introducing a range of incentives to encourage people to switch.
However, according to Mortgage Choice spokesperson Kristy Sheppard buyers must be cautious of moving until they understand the true benefit vs. cost equation.
“We are excited to see a further awakening of lenders’ competitive spirits within the home loan space. I expect the recent campaigning to torment others into action.” Said Ms. Sheppard.
“It will benefit many consumers by heightening their awareness of the wide variety of home loans and lenders available. Let’s just hope they look beyond fancy marketing campaigns and understand the true value of any incentives. Our advice is to focus on comparing the real substance of home loan products available today. The benefits of switching must outweigh the overall cost of doing so.
“The new offers, including lenders offering to pay switch fees and providing interest rate discounts, should spur more fed-up borrowers to shop around. Mortgage Choice is already observing a significant spike in borrowers researching their options. Our website’s unique page views for refinancing-related content have jumped 25% on the same period in 2010 and 14% on last month.
“It is also interesting to note that our 2010 Refinancers Survey found those who switched loan product as well as lender saved more per month than those who simply switched products. Further, those who used a mortgage broker were more likely to switch both and to save money from doing so.”
A borrower with a 30-year $300K principal and interest loan at 7.3% can reduce the interest owed by almost $22K over the loan term if they switched to a 7% rate loan. Going from 7.6% to 7% reduces it by over $44K. Of course, this does not take into account possible exit fees, set up fees, ongoing fees and lenders mortgage insurance but it does provide an idea of the difference switching can make.
“I really hope we continue seeing a rise in well-priced, innovative home loans. However, it will make the mortgage market more complex for borrowers. Working with an experienced mortgage broker with a large lender panel should help save time, money and confusion,” said Ms Sheppard.
Source: Mortgage Choice
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