Refinancing surges: borrowers bet on rate cut
The proportion of home loan borrowers changing mortgage arrangements surged to 37.3% of all new mortgages in December, the highest level since March 2012 according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that refinancing rose over the last quarter of 2014 from 33.5% of all home loans processed in September, to 37.3% in December.
Also in December, the proportion of borrowers choosing fixed rate loans fell significantly to 14.5% of all home loans processed from 17.1% in November. The proportion of introductory loans, offered by lenders to incentivise borrowers to move from other institutions, also rose from 4.9% in November to 5.8% in December.
Mark Hewitt, General Manager of Sales and Operations says: ‘The last time we saw refinancing at these levels, in March 2012, borrowers were acting to lock in rates, and fixed interest loans reached a four year high. This time round with speculation that interest rates are more likely to go down than up, borrowers are shopping around for the variable rate deal and avoiding fixed for the time being.’
Refinancing averaged 37.3% nationally, but there were variations in different states, with the highest levels found in Victoria (42.2% of all home loans processed for that state in December), and South Australia (41.7%) followed by Queensland (39.9%), Western Australia (36.7%) and New South Wales (31.8%).
First home buying continued to fall to unprecedented, low levels, comprising just 6.9% of all home loans processed nationally by AFG. First home buying accounted for only 1.7% of all new home loans in NSW, 3.9% in Queensland, 5.3% in South Australia, 6.9% in Victoria and 18.9% in Western Australia. The long term national average for first home buyers was previously around 15%.
In December, AFG achieved a major milestone, with its loan book reaching $100 billion. This makes the aggregation business of the company 50% larger than the next biggest aggregator in Australia.