“About 40 per cent of people who tried to refinance were unable to do so,’’ Digital Finance Analytics principal Martin North said.
“If you go back a year it was 5 per cent.”
Data from DFA and investment bank UBS show there has been a spike in the number of failed mortgage refinancing applications.
And while those applicants cleared the bar for their original loans, that bar has now become a lot higher, following years of banking reform and the fallout from the banking royal commission. It means borrowers can be stuck, unable to move to lower rates offered by banks
“When people took out the loans there was a lot of widespread fudging of the numbers,’’ chief investment officer with funds management firm, Forager Funds, Steve Johnson said.
While Mr Johnson sympathised with those borrowers, he said he was not in the least bit surprised there had been a recent spike in the number of loan refinancing rejections.
“It’s a perfectly natural consequence of more conservative lending standards,’’ he said.
“We can either have more conservative lending practices and a massive increase in the number of people being rejected for refinancing, or we can have really loose credit and everybody’s able to refinance.
“You just can’t have one of those things without the other.’’
Mr Johnson said the banking royal commission was behind the loan approval lull.
“It has accelerated it, and made it a lot more dramatic than it otherwise would have been,’’ he said.