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More than half of mortgagors plan to refinance in the next two years to take advantage of rate cuts, according to FBAA research.
Brokers stand to benefit from an expected jump in refinancings over the next two years, new research by the Finance Brokers Association of Australia (FBAA) has found.
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The FBAA’s Buyer Renter Index Research found that 55 per cent of those with residential property loans plan to refinance in the next two years, largely driven by a desire to take advantage of lower rates.
Of those refinancing, half plan to engage a mortgage broker, according to the survey, which was commissioned by CoreData and based on a survey of 1,251 home buyers, renters, and renter-buyers between 9 and 28 October 2024.
When those with a mortgage were asked about motivations behind refinancing, the research highlighted a general expectation that interest rates would fall soon and a wish to monopolise on savings.
Indeed, the Reserve Bank of Australia (RBA) has begun the first easing cycle for four years, after delivering a 25-bp reduction to the cash rate following the monetary policy decision yesterday (18 February), lowering the rate from 4.35 per cent to 4.10 per cent.
Those planning to refinance were asked why they would look to refinance, with 44 per cent saying they wanted to capitalise on lower rates, a quarter saying they wanted to access home equity, and 22 per cent saying they wanted to change the loan term.
Similarly, those who had refinanced in the last 12 months were largely motivated by cost savings, with 29 per cent saying they refinanced to take advantage of lower interest rates, 24 per cent wanted to access home equity, and 20 per cent answered it was to switch to a variable or hybrid rate.
Noting the trends, FBAA managing director Peter White said interest rate cuts would be “a huge confidence boost” for borrowers, but urged potential home buyers to speak to a broker before buying property or refinancing.
“What many buyers don’t realise is that there are often more purchasing options than they realise and some of those options can only be accessed through a finance and mortgage broker,” he said.
He also repeated the FBAA’s call for the government to intervene and force the regulator (APRA) to immediately reduce the serviceability buffer rate from its current rate of 3 per cent.
White said that government and regulatory policies were needed to support more home owners and those looking to buy property.
“The Australian property dream is still well and truly alive, but governments must work harder to help people achieve it,” he said.
Both the Albanese government and the opposition have set out several initiatives to improve home ownership in recent weeks, with the federal government announcing a two-year ban on foreign investors buying established homes in order to boost housing supply.
Moreover, Treasurer Jim Chalmers MP said last week that he had instructed the regulators to update their guidance to make it easier for those with student debt to get a home loan and clarify rules on presales for developments.
Meanwhile, the shadow assistant treasurer and shadow minister for financial services, Luke Howarth MP, has said that major changes need to be made to serviceability buffers to support home ownership.
Howarth said: “Something that we are looking closely at is the APRA serviceability buffer and whether APRA adding on a 3 per cent buffer after 12 interest rate rises is appropriate.
“My colleagues Michael Sukkar and Andrew Bragg have been working hard on these issues and will be announcing more reforms on serviceability.”
Howarth has previously told The Adviser the serviceability buffer (which requires banks to assess borrowers on an interest rate 3 percentage points higher than the advertised rate) could be tweaked in order to better support home buyers.
A Senate inquiry singled out the serviceability buffer as a major barrier to new borrowers and refinancers, with both the Mortgage & Finance Association of Australia (MFAA) and the FBAA urging changes to the 3 per cent buffer.
[Related: APRA slammed for ‘nonsensical’ decision to retain 3% buffer]
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