This as surging interest rates and cost-of-living pressures force Aussies to seek a better home loan deal
For the first time since 2020, some Australian states saw new loans eclipsed by refinance volumes, fuelled by surging interest rates and cost-of-living pressures, according to new research from PEXA.
The quarterly PEXA Mortgage Insights Report revealed that 98,527 refinances were completed in New South Wales, Victoria, Queensland, and Western Australia – nearly 2,000 more than the 96,767 new loans issued during the same period.
New loans had previously not dipped below 100,000 in a quarter since June 2020, prior to the COVID-19 pandemic.
All states reported year-on-year growth in refinances, as borrowers continued to seek more favourable deals on their home loan to ease their financial pressures, on the back of the Reserve Bank of Australia’s repeated interest rate hikes.
The growth in refinances contrasted sharply with the challenging market conditions for new lending.
New loans to fund the purchase of property plunged 17.9% on the December 2022 quarter and were 25.3% lower than the figure posted in the prior year. Average loan amounts were also trending lower over the period in a softer sales market.
“In the current market climate, with financial headwinds putting strain on borrowers, we are continuing to see exceptionally high refinancing activity across the nation – so much so that these volumes have exceeded new loans, which is not something we’ve seen before,” said Mike Gill (pictured above), PEXA’s head of research.
“This elevated refinancing activity is likely to continue due to the unusually high number of fixed-term loans that will be expiring in the next two years. It will also likely be supported by the RBA strongly flagging the possibility of more rises later this year, in order to bring inflation closer to the target band of 2-3%.”
Findings also showed that Queensland had the most residential new loans in the March quarter with 28,428. This was followed by Victoria with 25,841 and NSW with 24,148. However, all states posted significant falls.
NSW had the highest average loan amount in the first quarter, with $852,782 – down 8.4% compared to the prior year. Victoria and Queensland were down 6.9% and 3.8%, respectively.
In the March quarter, a total of $60.5bn in new lending was issued across NSW, Victoria, Queensland, and WA. Of this amount, $54.2bn was for residential property and the remaining $6.3bn was for commercial.
Victoria recorded the most refinances in the first quarter, completing more than 35,000 – that’s up 29.7% year-on-year.
WA registered the highest growth in refinances, increasing 35.9% year-on-year to 10,943 refinances during the March quarter.
The median refinanced loan amount across the four states was largely unchanged over the past year, with NSW posting the highest median at $492k, and WA the lowest at $355k, PEXA Mortgage Insights Report showed.
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