The fixed rate expiry bubble — which is fuelling the refinancing boom — will continue until July 2023, a new report has predicted.
Refinancing is booming and this trend will continue as long as interest rates rise and a large number of fixed rate home loans reach or approach their expiry dates, according to the inaugural National Australia Bank (NAB) Market Megatrends report which combines analysis from property research house CoreLogic.
Refinancing has remained at elevated levels since the Reserve Bank of Australia (RBA) began lifting interest rates this year for the first time in more than 11 years, NAB and Advantedge executive of broker distribution Phil Waugh said in the report.
“In this environment, refinancing offers customers a prime opportunity to ensure they are in the right product at the right rate,” he said.
The Australian Bureau of Statistics (ABS) Lending Indicators 2022 figures showed that in dollar terms, the refinance market reached a record $18.9 billion, while for owner-occupier refinancing rose to a new record high of $12.8 billion.
On the other hand, investor housing was 3.5 per cent lower compared to a year ago at $6.1 billion.
Property Exchange Australia’s (PEXA) Refinancer Sentiment Research for September 2022 found homeowners refinanced their home loan on average 5.6 years after purchasing property, while those who had refinanced in the past 12 months were highly likely to refinance again, with 81 per cent stating that they were intending to refinance in the next two years.
Furthermore, 45 per cent of recent refinancers switched lenders, while the remaining 55 per cent stayed with their existing lender.
Almost half (48 per cent) of refinancers used or were intending on using a mortgage broker, but 83 per cent also undertook independent research.
Mr Waugh also underscored that borrowers would require support from brokers to mull over their options as they roll off low-rate fixed home loans into an environment of rising interest rates.
“Brokers are doing a stellar job of educating their customers on the mortgage market and enabling them to refinance to get the best product and pricing. Cashback opportunities are providing additional incentives to customers to switch home lending products,” he said.
Home borrowers have increasingly been seeking advice from brokers — particularly as inflation and interest rates rise — with recent research by the Mortgage and Finance Association of Australia (MFAA) showing that almost seven in 10 borrowers go through a broker for their home lending needs.
For lenders, debt-to-income ratios are top of mind as they aim to provide “attractive” loan propositions while remaining sustainable from a business perspective, Mr Waugh said.
NAB’s objective is to retain existing borrowers who are reverting to a variable rate as their fixed rates expire, while growing market share by attracting customers from other lenders whose fixed rates are expiring, he added.
“On like-for-like refinancing, the use of technology to ensure a seamless, fast process for brokers is, and will remain, critical.”
If you’re looking to refinance for a better rate or looking for the right rate for your clients at zero cost, contact Finni mortgages experts and let us do the hard work for you.Visit our website here or call 1300 002 023 to learn more on how we can help you.