Joust Talks Loan Refinancing with Ausbiz

August 3, 2022

CEO of Joust, Carl Hammerschmidt speaks to Ausbiz - discussing loan refinance activity amid rising rates, what consumer and lending confidence is like, LVRs and other data from the Joust platform.

"Look, we're seeing people really wanting to move towards those variable rates. The way that the fixed rates are working at the moment, they're almost irrelevant for the average borrower."

Speaker 1: Welcome back. You are watching The Pulse here on Ausbiz. Well, let's get across some of the mortgage market activity out there at the moment. We keep talking about falling house prices. Today, also the data is a bit softer than expected. Building approvals are weak, and housing finance. Let's go and Carl Hammerschmidt from Joust is going to join us on the program. Carl, welcome back. It's great to again.

Carl Hammerschmidt: Thanks for having me.

Speaker 1: Tell us about some of the trends you're seeing through your platform, about what's going on when it comes to the mortgage market. One thing that was really interesting today, that despite this high interest rate environment we find ourselves in, there's a lot of refinancing activity taking part at the moment.

Carl Hammerschmidt: Oh look, we've seen a massive rush to refinancing through Joust platform over the last few months. Compared to last year, we're up almost 220% year-on-year, with regards to people coming through the platform. And 70-80% of that volume is looking to refinance the mortgages that they're currently on. People are coming off their fixed rates that they've been on for a couple of years now, a lot of them are starting with a one and they're looking to see what they can get in the new market.

Speaker 1: How difficult is to go and find a competitive interest rate at the moment? Because we know that market rates have moved higher, what can you tell us about that particular sense for those people who are still trying to go and refinance?

Carl Hammerschmidt: Well, I think it's a good market for consumers, because there are a lot of lenders out there who know that there's a lot of volume coming onto the market and the smart borrowers who are willing to shop around, willing to do the research, and willing to really compare the lenders with each other, there's still good deals to be had out there. They're certainly not the deals of 6-12 months ago, however, the lenders are aware that they need to be offering sharp rates because people are moving around.

Speaker 1: Carl, let's go and break it down and see what's going on when it comes to the appetite to go and lend to borrowers at the moment, particularly those who don't have a big deposit. We know that there was an influx of those type of borrowers coming through during the pandemic era, what are we seeing in that place now? LVRs, what's going on in that space?

Carl Hammerschmidt: Well, look, last year, in spite of, I guess, the uncertain pandemic environment, there was a lot of borrower confidence. Borrowers were looking to borrow with 80% or above LVR and lenders were willing to lend to that. And we were seeing volumes around 25-30%, sometimes, of the loans coming through the platform had an LVR of 80% or over. That's plummeted in the last few months. The loans that we're seeing coming through now at an LVR of 80% or above are down around single digits, around 5% of the volume coming through. So, lenders are certainly less keen to lend at those levels. And also, borrowers, the confidence is not there with the consumers any longer.

Speaker 1: Speaking of plummeted, give us a sense as to what's going on in the fixed rate market at the moment. We know that market rates have gone and skyrocketed, relative to where they were just a few months ago. What's the split now coming through when it comes to variable mortgage rates versus fixed?

Carl Hammerschmidt: Look, we're seeing people really wanting to move towards those variable rates. The way that the fixed rates are working at the moment, they're almost irrelevant for the average borrower. If you've got a $500,000, $700,000 loan, with the 1.25% that's moved already this year, with today's 50 basis points, that's 1.75% extra on your variable rate, and that's $700 a month on a $500,000 loan in repayments. That's massive for the average consumer. And the way that the fixed rate at, I think, 4.1, 4.2%, it makes them almost irrelevant for borrowers who are looking over the next couple of years. And so, if you can still get variable rates of around 2%, then that's where the majority of borrowers are looking at the moment.

Speaker 1: Carl, another one that keeps coming up in an environment where it's seen big running prices and high interest rates to boot is first home buyers. What's the proportion coming through now, because we know that it wasn't that long ago that a fair chunk of all new loans that were being written were going to first home buyers. Is that still the case, or has it really dropped off recently?

Carl Hammerschmidt: Look, in the last 18 months, particularly last year, we were seeing a really large proportion of new home buyers coming into the market. They were obviously being driven by the stimulus that the government had put into the market. Now, once again, in this environment, we've really seen that drop off. Traditionally, a lot of those first home buyers were coming in at LVRs of 80% or over, some even 90% or over, and I think that demand for that segment has really dropped off, particularly given the environment we're in and the dropping away that we're going to see from that stimulus.

Speaker 1: Carl Hammerschmidt from Joust, thank you so much for joining us here in Ausbiz. We look forward to chatting with you next time.

Carl Hammerschmidt: Thanks very much for having me.