Refinancing becoming a hot option for borrowers

As higher interest rates bite, 37% of mortgage advisers say they are getting more inquiries about refinancing.

Thursday, October 19th 2023, 6:02AM

by Sally Lindsay

In the latest Tony Alexander mortgage advisers survey these figures continue a string of relatively high readings since March.

Alexander says this likely reflects the extra hikes in mortgage rates in an environment where many people have been rolling off record low short-term fixed rates previously secured during the dying days of the pandemic.

Asking advisers about interest rates terms, Alexander has for the first time added 18 months as an option that advisers feel borrowers most want to fix at. About 38% of advisers say 18 months is the preferred fixing term.

About 10% of advisers have chosen one year, down from 31% last month, while 45% have said two years, down from 64%.

“In other words, doing some basic maths we can see equal numbers of advisers choosing one year as two years when the 18 month choice was not available. That makes sense.

“There is understandably no obvious impact on the three year preference from our survey change. Interest in that and longer terms remains near zero.”

The survey, taken before the election, includes comments from mortgage advisers by region. Alexander says the insights can be useful for placing flesh around the bones of the numerical indicators.

Auckland

First home buyers are active with no change in the level of interest from investors. Lenders continue to be conservative when assessing applications for LVR above 80%.

Bay of Plenty

Enquiries have doubled in the last four weeks, our 'holiday' has finished.

Waikato

Big increase in activity in the last few weeks. People are starting to see the light at the end of the tunnel and getting used to the higher interest rates.
Banks are still a mess of conflicting policies around CCCFA.

Hawke’s Bay

Good to see some common sense being applied around discretionary spending, but there is a higher level of being pedantic when it comes to insurance - if it is paid annually then we are being asked to provide statements.

Wellington

Some lenders still have restrictions on new bank clients wanting them to be a "live deal", others are happy to issue a pre-approval. Bank's keep increasing interest rates despite the OCR not increasing and increasing their test rates making first home buyers who were approved a few months ago on a higher amount, now at a lower amount, meaning their home search is harder due to their, now, lower purchase price. Mum and Dad want to help, but don’t want to complete a full application form, as in some cases this would disadvantage the potential first home buyer anyway due to their higher living expenses and liabilities.

Nelson/Tasman/Marlborough

Refinance enquiries have picked up as people are worried about affordability and seeking lower rates of which there are none. They often do not meet affordability hurdles at the current test rates and therefore even a longer-term loan may not be an option. Some will also find a lower equity position than previous finance terms and the reality of their situation is a tough one, some are grim. Banks are focusing on the refinance market over new purchases but servicing needs to meet test rates with comfort.

Canterbury

Existing pre-approved buyers are much more urgent than in the past creating some short term uptick in market activity , however "new inquiries" are up and down week to week - reflecting maybe some election uncertainty.

Otago

Fielding more inquiries from first home buyers and agents are reporting far greater numbers through open homes priced in the first home buyer range. Investors are sitting on the fence hoping like hell there is a change of government this weekend. A change will likely see a number of seasoned investors revisit further property purchase/s.

Queenstown/Lakes