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While serviceability continues to be the main barrier for refinancing, brokers have flagged that reduced buffers are easing the burden.
A new broker survey from the Mortgage & Finance Association of Australia (MFAA) has found that borrowers seeking to refinance are still facing challenges with overcoming servicing hurdles; however, these pressures have been easing in recent months.
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According to the third instalment of the MFAA’s Refinancing and Mortgage Stress survey, which was conducted in August 2024, brokers believe servicing challenges are easing.
While the level of refinancing has softened in the past year as a result of the end of the fixed-rate cliff and interest rates remaining at decade highs, 98 per cent of the 372 mortgage broker respondents said that they had helped refinance a client to a new lender in the prior six months (although nearly all said they had negotiated with their current lender before doing so).
Moreover, 90 per cent said they had clients seeking refinance options for the first time.
However, similar to the first two instalments of the survey (in February 2024 and August 2023), serviceability remained the biggest barrier to successfully refinancing.
According to the survey, 68 per cent of brokers said serviceability was the main reason clients had been unable to refinance in the past six months.
This was lower than the 87 per cent recorded in February 2024 and the 83 per cent in August 2023 (when the cash rate was lower than it is currently, at 4.1 per cent).
While the prudential regulator has maintained the 3 per cent mortgage serviceability buffer for the past few years, several lenders have rolled out exceptions for certain borrowers.
More than half of broker respondents (56 per cent) said that lower buffers for like-for-like refinances had made it a little easier for customers to refinance with another lender.
MFAA CEO Anja Pannek said: “It is worth noting a slight but material recovery in the growth of real wages and that the Stage 3 tax cuts came into effect in July, giving Australians more in their pay packets.
“The results of our survey indicate that this additional household income is a contributing factor helping with serviceability.”
Similarly, fewer brokers were reporting challenges with ‘mortgage prisoners’ in this survey, falling from 84 per cent to 69 per cent in the six months to August 2024.
However, the MFAA’s survey revealed that mortgage borrower concerns about the cost of living were a growing financial stress factor.
Around a quarter of survey respondents said the cost of living was causing financial stress to borrowers – the largest proportion recorded.
Pannek said: “From the first survey we conducted in July 2023 to today there has been a number of shifts in the economic and lending landscape, which can be seen in the findings of our latest survey results…
“While the cost of a mortgage is still the leading cause of financial stress, as Australians become accustomed to rates at the levels they are today, it is non-negotiable expenses such as childcare and energy bills where families are feeling the pressure.
“Our survey found that 90 per cent of brokers actively prompt their clients to consider their options, whether that be repricing with their current lender or refinancing to a new one.
“This simple prompt can save Australian borrowers thousands over the life of their home loans.”
The refinancing survey comes amid increasing focus on the cost and accessibility of mortgages in Australia.
Escalating house prices, a high interest rate environment, and high serviceability buffers have led to challenges for lower income earners and, particularly, first home buyers, to qualify for finance to purchase a home.
There have been ongoing calls for more flexibility from lenders to address this issue, with a new Senate inquiry launched to assess whether the present financial regulatory framework adequately prioritises the goal of home ownership for Australians.
Speaking on The Adviser’s In Focus podcast about the new inquiry, the chair of the committee, senator Andrew Bragg, said that the inquiry is actively seeking input from mortgage brokers to help shape its recommendations.
Indeed, the Liberal senator (and shadow assistant minister for home ownership) told The Adviser that he is “in the market for new ideas” to improve first home buyer activity and deregulate stringent lending laws, saying that brokers are ideally placed to give evidence to the inquiry.
He said: “[M]ortgage brokers, I would say, would be the people I’d probably want to hear from the most – as a kind of consumer advocate – here, because they are the people that are closest to the ground in terms of understanding the challenges people face in getting financing.
“I mean, they work so closely, so diligently, with their clients. So if we don’t hear from mortgage brokers, I don’t know that it’ll be a very good inquiry.”
Submissions for the financial regulatory framework and home ownership inquiry are open until 26 September and a final report is expected by 5 December. You can make a submission here.
[Related: ‘I want to hear from brokers the most’ for housing inquiry: Senator Bragg]
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