Non-banks lose as more consumers refinance

Refinancing is at a record high, according to figures released by AFG with the AFG Mortgage Index showing 40.8% of all new mortgages are for refinancing purposes.

“Much of this refinancing marks a move away from non-bank lenders to the Big Four banks, underlining AFG’s call to the government to stimulate competition in the sector,” the aggregator said.

The index also showed variable rate mortgages are more popular with consumers – the proportion of fixed rate mortgages fell to 7.9%, compared to 25.3% just five months ago. The move reflects expectations that rates will move soon.

AFG also revealed its mortgage sales figures are up. The aggregator says sales were 17% higher in July than June. AFG arranged $2.4 bn of mortgages last month compared to $2 bn in June.

While sales in July were still down 14.1% compared to July 2007, the gap is closing. Sales in June 2008 were down 22% compared to the previous year, while May 2008 figures were down 28% compared to the corresponding month in 2007.

“Consumer confidence is at an all time low, although in recent days there has been some encouraging signs with lower crude oil prices and the prospect of an RBA cash rate cut in the not too distant future. However consumers will only benefit if these savings are passed on.

"The official RBA rate may no longer be the benchmark for home loan pricing, rather competitive tension will determine delivery rates to borrowers. Only robust competition between lenders will ensure that borrowers benefit, the big 5 banks now account for a far greater share of the market, compared with a year ago. We’d like to see the Government act quickly to stimulate genuine competition in the sector,” said Malcolm Watkins, executive director of AFG.