Refinancing reaches record level in year since exit fees ban: ABS

Larry SchlesingerDecember 8, 2020

A record 35% of all housing loans written in the last financial year – the 12 months since Treasurer Wayne Swan introduced the ban on mortgage exit fees – were for borrowers refinancing their existing mortgages, rather than buying or building new property, according to ABS housing finance data going back to 1975.

The figures also show that over this period the value of refinanced home loans rose 17% and accounted for all growth in mortgage lending over the 12 months period.

The exit fee ban, which was introduced on July 1 last year and applies to variable interest home loans taken up from this date, has made it easier for borrowers to switch lenders without copping mortgage exit fees in some cases as high as $7,000.

A spokesman for the Swan’s office told The Age's Tim Colebatch, who crunched the data, that the figures indicated there was now increased competition in the banking sector, with people “taking advantage of our ban on mortgage exit fees”.

''This has put more power in the hands of Australian families; they can walk down the street to another lender if their current bank isn't looking after them.''

In contrast to the rise in refinancing, loans to buy established properties fell by almost $1 billion, while loans for new construction were up just $24 million compared with the previous 12-month period.

While APRA figures show that the major banks are still the dominant force in mortgage lending, with 86% of the market over the past year, their market share has contracted, with smaller Australian banks and wholesale lenders increasing their share.

Four years ago the major banks had 75% of the market but dramatically increased their share, with the Commonwealth Bank taking over Bankwest and Westpac buying St George.

July figures compiled by mortgage aggregator AFG, which writes one in 10 home loans in Australia, show that 37% of loans arranged by its brokers were refinanced mortgages, with a sharp rise in loans refinanced through non-major bank lenders from 22.9% to 26.7% of all loans – the highest proportion in seven months.

Over July major banks’ market share of refinanced mortgages arranged by AFG brokers fell from 77.1% to 73.3%

The major banks overall share of total loans arranged by AFG has fallen from 82% to 77.6% over the past 12 months to July.

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Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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