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Larger mortgages of over $1 million are exhibiting “unprecedented repayment strain”, according to Equifax, driving more refinancing.
A “refinancing frenzy” is driving up consumer mortgage applications, with strong demand expected to continue, new Equifax data showed.
The Equifax Quarterly Consumer Credit Insights for March 2025 has revealed that both investors and owner-occupiers are racing to refinance their loans, potentially buoyed by the move from the Reserve Bank of Australia (RBA) to cut the official cash rate.
While broker industry data has shown that the February rate cut had little impact on mortgage demand, new data from analytics company Equifax has shown that refinancing made up 37 per cent of total mortgage demand in March, with home loans of more than $1 million showing “unprecedented repayment strain”.
Based on the volume of mortgages going through the Equifax Consumer Credit Bureau by credit providers in the March 2025 quarter, mortgage applications increased 5.2 per cent (year on year).
Investors accounted for nearly 80 per cent of refinancing activity, more than twice the rate of owner-occupiers, which the group said "demonstrates a significant appetite for current economic conditions, with investors potentially anticipating further rate reductions".
Equifax’s latest research showed that many borrowers are now on their second or even third refinance since 2022, with the refinancing trend being driven by economic pressure, strategic moves to unlock equity, secure better terms, or get ahead of future market shifts.
Over 30 per cent of refinancing activity is from loans originated in 2020–21, a low cash-rate period.
Many refinancers also previously refinanced in 2022–23, suggesting a continued repositioning.
Equifax chief solutions officer Kevin James said the refinancing trend could continue.
“The comeback in mortgage demand looks likely to continue, with refinancing accounting for 37 per cent of mortgage demand in March,” he said.
“Given the process of refinancing can take time, there will be a cohort of consumers who are planning to change their mortgage provider in the coming months. Additionally, the current turmoil in global markets created by ongoing tariff negotiations could see the Reserve Bank drop interest rates more frequently or by larger margins than originally expected.“
James told The Adviser that the timing of rate cuts would impact future refinancing activity.
“We’re already seeing an uplift in refinancing on the anticipation of further rate cuts. Once this anticipation becomes reality, we certainly expect to see a significant spike in further refinancing activity - including from consumers who may have held off after the first cut in the hopes of securing a better deal once rates fell further, and those who might be stuck in the 'thinking about it' phase of refinancing or haven’t yet gotten their finances in order.
“For homeowners who are currently struggling to keep up with payments, further rate cuts will deliver some welcome relief,“ he finished.
Much like Equifax’s research, data from online settlements provider PEXA last month showed that interest rate cuts have boosted already rising refinancing activity, driven by renewed competition for mortgages.
Mortgage pressure mounts
Despite rate cuts helping ease financial strain on borrowers, worsening financial stress and stubbornly high property prices have kept pressure on mortgage holders.
James said that borrowers with bigger mortgages were more at risk of missing repayments.
Indeed, Equifax data revealed an increase in total mortgages in arrears, suggesting that home owners with larger loans were falling behind, despite the recent rate cut.
“We saw a more than 9.2 per cent increase in the dollar amount now in 90 plus day mortgage arrears,” he said.
“This tells us that people with larger loans are struggling to keep up with payments and falling further behind. In fact, for the first time on record, mortgage loans exceeding $1 million are displaying higher arrears rates compared to all other loan size segments.”
Recent research from NAB showed that household financial stress rose for the second straight quarter, with more than one in three viewing money as a very significant source of stress.
However, research from Westpac’s DataX Consumer Panel recently found that repayments peaked in February at $2,741 – or 31.3 per cent of income – before coming down in March after the Reserve Bank of Australia reduced the official cash rate by 25 bps in February.
[Related: Housing affordability fears add to mounting financial stress]
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