We just released the latest edition of “The Property Imperative”, which is available free on request. This provides access to our latest household survey results. One key segment is the refinance sector and we feature our survey analysis on this segment today. This segment has become the new battleground for mortgage sector growth. Indeed there are deals below 4% currently to be had, including for 3 years or more fixed. Remarkably low rates.
There are around 695,000 households considering a refinance of an existing loan of which 78% relate to an owner occupied property, and 22% to an investment property. To assist in the refinance, 76% of households will consider using a mortgage broker.
Households are looking to refinance for a number of reasons, including reducing monthly repayment (39%), to lock in a fixed rate (15%), because of a loan rollover (13%), in reaction to poor lender service (10%), for a better rate (10%) or to facilitate a capital withdrawal (11%). In the next 12 months, 34% of these households are likely to transact (a rise from 29% last time), whilst 47% expect house prices to rise in the next 12 months.
The growth in refinancing can be expected to continue as the focus turns from investment lending to owner occupied new and refinance loans. There are a number of discounted offers for refinancing currently available. We note that a higher proportion are refinancing to a fixed rate.
The most likely loan size to refinance is $250-500k. The refinance drivers vary across the loan size bands. The largest loans are more associated with releasing cash, whereas smaller loans are more associated with reducing monthly payments, or resetting an existing term loan. We also note brokers are more associated with the refinance of larger loans.
The larger the loan, the more likely it is that the refinance will be to a fixed rate loan and to an interest only loan.
