Falling interest rates are driving demand for refinancing as borrowers consider whether they are paying too much for their mortgage.
Chris Evans, general manager of business development and relationships at First Mortgage Services (FMS), told Mortgage Business he has seen a significant rise in refinancing.
The mortgage processing company traditionally handles 60 per cent purchases and 40 per cent refinancing deals, but in recent months refi deals have been contributing more than 50 per cent of all loans processed, Mr Evans said.
“The level of enquiry and refinances picks up as rates come down,” he said. “It’s very healthy for the market. With 50 per cent of mortgages written by brokers, it’s good for brokers, it’s good for lenders, and it’s helping the economy tick over.”
The Deloitte Australian Mortgage Report 2015, released last month, found that refinancers and upgraders would be the biggest drivers of home lending over the short term.
When asked which categories of consumer will drive the greatest mortgage growth over the next three years, eight executives from Australia’s lending industry pointed to refinancing.
“Everyone selected existing homeowners either refinancing or upgrading as continuing to be the dominant driver of growth over the next three years,” Deloitte partner, financial services, James Hickey said.
Frank Ganis, executive director at Macquarie Bank, noted that credit growth in recent years has been lower than historic levels.
“Lending growth has been in refinancers, with new lending at lower levels of around three to four per cent,” Mr Ganis said.
Speaking to Mortgage Business, industry veteran Kym Dalton compared the current lending environment to the US refinance boom early last year.
“I have spent a fair bit of time in North America and a feature of the market there was obviously the refinance boom when interest rates dropped,” he said.
“Right now in Australia, with this mini US-style refinance boom, retention is just not at the top of the agenda at the moment.”