The latest member sentiment survey by the Mortgage & Finance Association of Australia (MFAA) shows that home loan borrowers are less concerned about meeting their mortgage repayments.
However, even as the number of "mortgage prisoners" declines due to easing serviceability barriers, the rising cost of living remains a significant financial stress for many borrowers.
The third refinancing and mortgage stress survey from the MFAA was conducted in August 2024, following previous surveys in July 2023 and February 2024.
The survey asked 372 MFAA members – mortgage brokers – about their perspectives 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 MFAA CEO Anja Pannek (pictured above).
“Serviceability continues to be the number one challenge for home loan borrowers looking to refinance. We have however seen that this is less of a factor around being able to refinance compared to our first member sentiment survey, in February 2023.”
In the latest survey, 68% of mortgage brokers identified serviceability as the main reason clients were unable to refinance in the past six months, compared to over 80% 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.
“Whilst still elevated, we’ve also seen a reduction in the percentage of mortgage brokers reporting they have clients who are ‘mortgage prisoners’ in August 2024 compared to previous surveys.”
In the first two surveys conducted in July 2023 and February 2024, at least 80% of respondents reported they had some clients that were mortgage prisoners.
Mortgage prisoners – fixed-rate borrowers who are at risk of not being able to refinance with a different lender – had risen dramatically following the RBA’s steep interest rate rising cycle over 2022-23.
However, with cash rate stabilising throughout 2024, mortgage prisoners have become less of an issue.
In the latest survey, this decreased to 69%.
The survey also asked mortgage brokers if the 1% serviceability buffer available for ‘like-for-like’ refinances through some lenders was benefiting clients.
This change helped alleviate the 3% serviceability buffer imposed by APRA on some lenders.
More than half of respondents (56%) reported that the buffer was of use to their clients, helping them access a better deal with another lender.
Cost-of-living concerns were reported as a growing cause of financial concern for mortgage broker clients with over one quarter of survey respondents viewing them as the most likely reason for financial stress.
“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,” said Pannek.
The survey also found that borrowers continue to seek out brokers for the first time to refinance, even as the so-called fixed rate wave 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,” said Pannek.
“Whilst the level of refinancing has subsequently fallen, 90% of our members told us they have clients coming to them for refinancing the first time to refinance.”
Negotiating with the current lender is the first step for the vast majority of mortgage brokers (98%), when working with clients looking at their refinancing options.
Mortgage brokers write seven out of 10 home loans in Australia and are critically important to Australian mortgage lending.
“The service a mortgage broker offers doesn’t stop once a loan is settled. Our survey found that 90% of brokers actively prompt their clients to consider their options, whether that be repricing with their current lender or refinancing to a new one,” said Pannek.
“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% of all mortgage brokers in Australia.
