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By: Jessica Darnbrough
While much of the rhetoric in the press suggests borrowers are largely refinancing for a better rate, new data has revealed that there are actually three main drivers behind refinancing activity.
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According to The Adviser’s latest weekly straw poll, there is more to refinancing than meets the eye.
Of the 290 respondents to the survey, the majority of brokers pegged debt consolidation as the main driver behind refinancing.
37.2 per cent of brokers said debt consolidation was the number one reason for refinancing, while 29 per cent said it was a better rate, and 25.9 per cent said it was to release equity.
First Chartered capital broker Greg Hearn told The Adviser that while some borrowers were obviously still refinancing for a better rate, competition for the cheapest mortgage was not the main driver behind his refinancing activity.
“Most of my refinancing activity comes through my investor clients. Investors are starting to fill the gap that was created by first home buyers. They are building a little bit of equity in their property and then refinancing so that they can buy another property,” he said.
Mr Hearn said while refinancing was becomingly increasingly more common among borrowers, he preferred not to “churn the loan book”.
“I really don’t like to refinance my clients. Ultimately, I would prefer to put them in the right loan the first time, every time. However, depending on rates and other economic factors – sometimes refinancing is hard to avoid. When refinancing is essential, I at least try to keep my client with the same bank, because this ultimately saves them hassle, time and expense.”
Similarly, Core Mortgage Brokers principal Peter Wotherspoon also doesn't like to refinance his clients.
"If I go out to see a client that is looking at refinancing, I try to keep them with that bank. I will negotiate a better rate on their behalf. I am not a big churner of business," he says.
"Often refinancing is unavoidable. There are many different types of clients that want to refinance. Young couple who want a cheaper rate as well as investors that are looking to buy another property."
But while some brokers would prefer to avoid refinancing altogether, data from AFG shows refinancing activity is on the rise.
According to the latest data, refinancing activity made up 39.0 per cent of all AFG mortgages sold during the month of June – up from 35.7 per cent this time last year.
