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The average run-off for a trail book rose to 25 per cent this year, largely driven by higher refinancing activity.
Managing director at Trial Homes, Nick Young, recently spoke on a webinar with Sascha Moore, where he said on average, a book loses 20 per cent of its trail per annum, however, that number has risen to 25 per cent per annum this year.
Speaking to The Adviser, Mr Young attributed this to a “significantly above-average level of refinance activity happening broadly across the country”.
In addition, rising interest rates have contributed to this lift, which Mr Young explained has caused borrowers to go out and try to get the best deal they can, as sensitivity to interest rates increases.
“The other thing is that there was an extraordinary number of fixed rate loans that were put in place over the course of 2021.
“So, they’re coming up for refinance broadly. There’ll be a lot of them coming up [fixed rate loans expiring] over the remaining part of this year,” Mr Young added.
Mr Young also noted the banks have been “very aggressive” with cashback offers and incentives, effectively “trying to poach clients off each other” as another driver behind the high level of refinance activity.
However, in the webinar, Mr Young stated he wouldn’t be surprised if trail book run-offs dropped below 20 per cent in the following year.
He explained: “It’s almost a bit of a balance item in the sense that you’ve got this above average level of activity now, you’ve got to expect that to balance out.”
“You’re going to have a low level of activity in the future. Simple as that.”
Refinancing hit all-time highs in 2022
The Australian Bureau of Statistics (ABS) revealed in January that a new record was set for external refinancing, with more than $19.5 billion of loans changing lenders in November 2022.
While the figures ultimately recorded new loan commitments dropping 3.7 per cent for housing last November, the boom in refinancing was notable.
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Annual comparison since November 2021 means that housing refinancing was 20.4 per cent higher, the ABS highlighted.
Specifically in terms of which types experienced growth, for the owner-occupier housing sector, refinancing rose 9.1 per cent to an “all-time high” of $13.4 billion, making it 27.1 per cent higher compared to 2021.
[RELATED: Refinancing hits ‘all-time high’ in November: ABS]
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