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In its latest member sentiment survey, the Mortgage & Finance Association of Australia (MFAA) has observed a shift in borrower concerns regarding home loan repayments, with cost of living emerging as a growing financial stress factor.
The third refinancing and mortgage stress survey conducted by the MFAA in August 2024, follows similar surveys in July 2023 and February 2024. The survey gathered insights from MFAA members – mortgage brokers – on borrowers’ ability to refinance and the prevalence of mortgage stress.
“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,” said Anja Pannek, MFAA CEO.
Serviceability remains a significant challenge for home loan borrowers seeking to refinance, though its impact has diminished since the initial survey in February 2023.
In the most recent survey, 68 per cent of mortgage brokers cited serviceability as the primary reason clients were unable to refinance in the past six months, down from over 80 per cent previously.
“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,” Pannek said.
“The results of our survey indicate that this additional household income is a contributing factor helping with serviceability.”
The percentage of mortgage brokers reporting clients who are ‘mortgage prisoners’ has also decreased.
In the first two surveys, at least 80 per cent of respondents reported having clients trapped in unfavourable mortgage situations. This figure has dropped to 69 per cent in the August 2024 survey.
The survey further explored the impact of the 1 per cent serviceability buffer available for ‘like-for-like’ refinances through some lenders. More than half of the respondents indicated that this buffer was beneficial, aiding clients in securing better deals with other lenders.
Concerns over the cost of living have emerged as a significant factor in financial stress, with over one-quarter of respondents identifying it as the leading cause of financial strain.
“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,” Pannek said.
The survey also highlighted that borrowers continue to seek brokers for the first time to refinance, even as the surge in fixed-rate loans subsides.
“Refinancing activity reached an all-time high in mid-2023 driven by the large number of low fixed rate loans rolling off into a higher interest rate environment,” Pannek said.
“While the level of refinancing has subsequently fallen, 90 per cent of our members told us they have clients coming to them for refinancing the first time.”
Negotiating with the current lender is the initial step for nearly all mortgage brokers (98 per cent) when assisting clients with refinancing options.
Mortgage brokers are responsible for writing seven out of 10 home loans in Australia and play a crucial role in the mortgage lending process.
“The service a mortgage broker offers doesn’t stop once a loan is settled,” Pannek said.
“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 August 2024 refinancing and mortgage stress survey was completed by 372 mortgage brokers, representing 1.9 per cent of all mortgage brokers in Australia.
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