Mortgage Brokers are expected to be busy as home owners refinance from high fixed-rate mortgages after yesterday's 25-basis-point interest rate cut, coupled with high real estate sales figures in the low cost areas.
The sticking point for many will be hefty fixed rate "break fees", which can be more than $20,000 on a $500,000 home loan.
Break fees, made up of a comparatively small charge to exit the loan plus a bigger fee that is the economic cost to the bank of losing the business, had become a bigger proportion of housing loan fees in recent years, he said.
The Housing Industry Association yesterday called on banks to drop severance and other refinancing charges from fixed-rate loans, but banks are unlikely to do so.
HIA chief executive Chris Lamont said banks would be swamped with borrowers trying to refinance.
A home loan taken out early last year when mortgage rates were 7.5-8 per cent would cost a borrower about $670 a month more on a $250,000 home loan, than if the loan were taken out today, he said.
Mr Lamont believes yesterday's drop in the cash rate will have little impact on the housing market, even if passed on by the banks, as buyers already believe mortgage rates are reaching the bottom of the cycle.
"Falling interest rates are now being overshadowed by the availability of finance, with the banks asking for higher deposits, particularly from first-home buyers," he said.
Real estate agents are reporting increased home sales, particularly for lower-priced property, with Australia's biggest agent, Ray White, making $2.37billion of sales last month, a 15 per cent rise on the same month last year.
