Serviceability the ‘number one’ barrier for refinancers: MFAA

According to the latest survey findings released by the Mortgage & Finance Association of Australia (MFAA), 87 per cent of respondents cited serviceability as the “number one” barrier to refinancing, up from 83 per cent in 2023.

The second Refinancing and Mortgage Stress survey was conducted by the association in February 2024, collecting responses from 440 mortgage broker respondents.

The aim of the survey was to understand how changes within the economy and lending space have impacted borrowers, according to the MFAA.

The Australian Prudential and Regulation Authority (APRA) decided to maintain the mortgage serviceability buffer at 3 per cent in December last year.

The survey revealed cost-of-living pressures were the biggest challenge for 6 per cent of mortgage broker clients as of February 2024 (up from 5 per cent last year) and 7 per cent cited “other factors” as a barrier, down from 12 per cent in 2023.

In addition, 59 per cent of mortgage brokers found that lower serviceability buffers for dollar-for-dollar refinances slightly eased the challenges for their customers to refinance.

This came after some lenders introduced a 1 per cent buffer for dollar-for-dollar refinances, although the strict requirements for eligibility presented their own challenge when trying to access financing under this option, the survey found.

Furthermore, 84 per cent of mortgage brokers said they have clients in a “mortgage prison”, up from 82 per cent last year, and 97 per cent said they negotiated a discount for clients, up from 88 per cent.

MFAA chief executive Anja Pannek commented on the survey findings: “The dial hasn’t shifted when it comes to mortgage holders being able to refinance, with our survey indicating that more than half of mortgage brokers having considerably more clients in this position than six months ago, when we first ran the survey.

“We have heard repeatedly from our members about clients who are good borrowers, with a strong repayment track record, being unable to refinance simply due to buffer rates.

“This is even when the client’s repayments would actually decrease if they were to switch lenders, trapping more Australians into a mortgage prison.”

Pannek added that flexibility around buffer rates should be a “long-term consideration”, regardless of whether or not interest rates come down in the future.

While 83 per cent of mortgage brokers reported that clients were more concerned about honouring repayments than they were six months ago, the survey revealed this number decreased by 10 per cent from last year.

In terms of reasons behind financial stress, 83 per cent said that interest rate rises were the main contributor, showing a decrease of 6 per cent from last year, followed by cost-of-living pressures at 15 per cent (up from 10 per cent).

“We should not overlook the fact, however, that there are also many borrowers struggling with the survey indicating that hardship inquires, while still low, are starting to increase,” Pannek said.

[RELATED: MFAA releases white paper recommendations for home loan discharges]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.