More mortgage customers are expected to refinance as a wave of fixed-rate loans expires in the months ahead.Credit:Rhett Wyman
Among bank investors,meanwhile,the refinancing boom is seen as apotential dampener on the high profits that have flowed to the sector as interest rates have taken off.
A flurry of analyst research has underlined the squeeze that stiff competition for loans is putting on net interest margins,which compare banks’ funding costs with what they charge for loans.
In a recent note to clients,Barrenjoey analyst Jonathan Mott said refinancing already accounted for almost 50 per cent of all new mortgage approvals,and that figure was likely to climb higher this year. Mott said in this environment,the contest between banks was “all about price”,which was bad for margins,but banks who did not join the fight could see their customers defect to a rival.
“If banks are not competitive with price,they risk seeing their mortgage book run off sharply,potentially setting the business back years,” Mott said.
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