Mortgage refinancing will drive the market in 2016, according to a new report, and brokers are in the prime position to capitalise.
According to the J.P. Morgan Australian Mortgage Industry Report (Vol 22)
, produced in collaboration with Digital Finance Analytics, there has been a noticeable change in who has been transacting, with a clear switch from investors to refinancers.
Investor demand has been reducing driven by lower expectations of house price appreciation and a tougher regulatory outlook. Investors have seen the sharpest reduction in intention to transact, reducing from around 50% to 40% for solo investors and around 75% to 60% for portfolio investors in 2015.
However, with interest rates still at record lows, the number of borrowers intending to refinance has been continuously increasing. Those looking to refinance has risen from 10% in early 2015 to 35%, according to the report, as they look to establish better terms on their mortgage or release equity for other investments as house prices have risen.
J.P. Morgan banking analyst Scott Manning says brokers will be key to success in capturing the surge of refinancing activity this year, with around 75% of refinancers expecting to use brokers versus other channels.
According to Manning, we are already starting to see the major banks adapt. For example, ANZ
has been increasing its broker usage while simultaneously decreasing its branch footprint – a trend which he says will continue across the banking landscape over the next five years.
“Certainly brokers are not only a high proportion of flow but they are a significantly higher proportion of that of new bank business. They are very important for banks to try and grow their book basically. So I think [brokers] are here to stay and I think that proportion will continue to improve over time,” Manning told Australian Broker
at the release of the report.
“If you look at what the banks of doing, they are reducing the size of the footprint in terms of square metres by moving banks. They are using smart ATMs where you can bank cash and bank deposits without going into a branch. They have kiosks with after-hours access where you can get coin change for SMEs.
“They are migrating their footprint off branches already. I think ANZ
has just been a bit more aggressive on that path… We can see that in Westpac as well. Their branches were down last year in particular and they have renegotiated the new deal with Australia Post to do more of the day-to-day banking in remote areas through the post office.”