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According to a poll conducted by The Adviser, brokers expect refinancing to dominate business in coming months. So, what is driving the surge in this sector of the market?
IN FINANCIAL circles, 2011 will more than likely go down as the Year of the Refinancer.
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Refinancing activity dominated the lending market last year, and the latest data suggests 2012 will be no different.
This data includes a recent straw poll conducted by The Adviser which found 50.8 per cent of the 297 brokers who responded to the survey believed refinancing activity would lead the way in 2012.
Only one third of brokers said investors would provide the greatest business opportunities; 9.1 per cent claimed upgraders/downgraders would dominate; and just 8.8 per cent believed first home buyers would be the most active.
This data is supported by the most recent findings from AFG, which show refinancing currently accounts for almost 40 per cent of all activity – up from the 29 per cent recorded in August 2009.
But while refinancing appears set to dominate activity again in 2012, what exactly is driving it?
Smartmove’s managing director, David Brell, says the exit fee ban has done little to stimulate this sector of the market; rather, he attributes the rise to increasing competition between the majors.
“The ban has had no impact at all [on refinancing activity],” Mr Brell says. “Clients are far more aware of their costs – and the mortgage is the big one.”
Frank Taddeo, director of Strategic Finance Brokers, agrees and says people are also more aware of their options. They know the market is competitive and they know, in many instances, that they can get a better rate by refinancing.
In addition, many homeowners prefer to renovate their current premises rather than go through the hassle of selling and buying, Mr Taddeo says.
“If we thought last year was a refinancing year, then this year will be even more so,” Mr Taddeo says.
“I say this because I don’t think there are going to be as many new purchases or new apartments being purchased, and people are not as easily led into investments as they have been in the past.
“As a result, I think this year we will see more refinancing than we have ever seen before,” he says.
The attractive fixed rates currently available are driving a lot of the refinancing traffic right now, The Mortgage Gallery’s Bruce Downing adds.
“Some of the lenders that are offering attractive fixed rates are not majors and people are prepared to move away from the big four and [toward] some of the non-majors and smaller lenders in order to take advantage of that,” he says.
“There are a number of non-majors offering very attractive fixed rates.”
Indeed, the competitive rate environment is encouraging borrowers to look more closely than ever at their current mortgage situation.
And while many may already be signed up to practically the best deal available, it seems they are not afraid to call a broker and ask for advice in this area, Mr Taddeo says.
“The lenders and their rates get a significant amount of media attention, which is forcing borrowers to think about their own situation and wonder whether they can get a better deal,” he says.
While many brokers don’t look too fondly at refinancing enquiries – preferring not to churn their book – refinancers are nevertheless helping to keep brokers busy in what is a very flat market.
In fact, with the latest data from the Australian Bureau of Statistics suggesting the property market will remain flat for the foreseeable future, many are seeing refinancers as a godsend.
