Kelvin Davidson: Cotality Chief Property Economist on the rising number of mortgage holders swapping loan providers

Those with mortgages are bank-hopping at record rates, but not necessarily to get lower interest rates. 

More than 3,500 holders switched nearly two and a half billion dollars of debt between loan providers last month. 

It's the highest since records began in 2017. 

Cotality Chief Property Economist Kelvin Davidson says it reflects a mix of factors including short term loans, minimal or no break fees, and cash-back incentives. 

He told Ryan Bridge it’s reasonably common to get 0.7-0.8% of the loan value as a cashback, up to certain caps, so it would make sense for people who are potentially under cashflow stress. 

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Episode Transcript

Speaker 1 (00:00):
Record numbers of us are refinancing our mortgages with a
new bank at the moment. Numbers from the Reserve Bank
show more than three and a half thousand mortgage holders
switched in the last year. This makes at the highest
rate of refinancing since twenty seventeen. Calvin Davidson's Totality Chief
Property Economists with me this morning. Calvin, good morning, Good morning.
So how many are coming off fixed? You I have

(00:21):
all the mortgage holders, how many are coming off our
fixed and the next we are.

Speaker 2 (00:26):
Yeah, it's quite a lot. So well, if you start
with about ten and twelve percent of the loans, they're
on flugging rates right now, and then if you look
at perhaps the next six months, there's about another forty
percent of debt that's on a fix rate now but
due to rollover in six months. So by the end
of the year we're going to have fifty five percent
of loans seeing a rate change. And so yeah, there's

(00:46):
there's quite a bit of flexibility there at the moment,
and that's the thing people have, the flexibility cash backs
are being offered. So thanks, switching is looking prettyppealing to
people at the lone.

Speaker 1 (00:55):
Yeah, what are the deals that you've heard about people
are getting.

Speaker 2 (00:59):
Well, sometimes those are heading a little bit behind the scenes,
but few anecdotes a bit of personal experience, So it's
I think it's very easily common to get sort of
point seven point eight percent of the loan dull as
a cash back up to certain caps. So it can
be a decent chunk of money if you're looking at
a fairly large mortgage. So it con cerdainly makes sense
for people who are potentially under cash flow stress for sure.

Speaker 1 (01:21):
With fifty to fifty five percent, as you said, coming
off by year end. At what point do these lower
rates translate into higher prices for property?

Speaker 2 (01:31):
Well, yeah, so the market in general at the moment
is we're calling it conflicting forces. So yes, ordinarily it'd
expect that impact of lower Morgie rates to be pushing
out house prices, and there's just a leg at the moment.
I think that's reflecting the other side of the ledge
of those conflicting forces, things like the weak economy and
labor market. Even if people have kept their job, perhaps

(01:52):
still not feeling as secure as they were, and so
I think that's really holding things back. I think the
second half of you could still be predy sejured for
the market, but at those impacts of lower interest rates
start to come through early next year, but even then
it's unlikely to be a boom because there's still a
supply out there and affordability isn't great. Better than it was,
but still not great. So I think we're looking at

(02:13):
a flatish market for a while.

Speaker 1 (02:14):
Calvin, what about the loan to value ratio limits? Are they?
Are we getting close to? Are people getting close to
that yet? What's the situation with that and is that
potentially going to act as a ceiling on any future booms.

Speaker 2 (02:27):
I think the old is yeah, that's sort of doing
this thing they're taking along. It's very tough as an
investor to get a loan if you don't have a
thirty percent deposit. Low deposit finance is more available for
owner occupiers, but even then the limits aren't really being tested.
I think the credit restraint that people are probably watching
more closely is the debt to income ratios. Now, they're

(02:48):
not necessarily doing too much either just yet, because test
rates inside the bank's still high enough that that's what's
kepting loan sizes. Those rates coming down is wide and
mortar rates come down, and that's the point at which
those formal get to income ratio rules will start to
kick in. So I think that's the thing that probably
limits the market over the medium term. And yeah, certainly

(03:09):
another factor to Adam's that mix of I guess, a
cautious outlook.

Speaker 1 (03:13):
Calvin appreciate that interesting stuff, Calvin Davidson, Totality, Chief Property Economists.
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