New lending eases to pre-pandemic levels, while refinancing still on the rise
New loan activity has slowed down back to pre-pandemic levels, while refinancing activity has continued to surge in the 2023 financial year, new research by PEXA showed.
According to PEXA’s latest Mortgage Insight report, Australians took out a total 481,234 new home loans in FY23, down 20.6% from the previous financial year, with all states experiencing double-digit drops in new home loans.
Queensland had the highest number of new loans issued among the states, with NSW and Victoria seeing the largest declines, as new lending returned to levels seen during FY20, at the onset of the pandemic.
Median loan amounts for new loans trended downwards in FY23 for both Sydney and Melbourne. In Sydney the figure dropped from $784,000 in FY22 to $739,650, and in Melbourne, the decline was from $582,000 in FY22 to $556,497 – movements that were in line with falling median sale prices in those cities during FY23.
Meanwhile, rising interest rates and attractive incentives offered by banks to borrowers to switch lenders led to an increase in the volume of refinancing activity. Refinancing swelled by 13.8% to 450,177 nationally in FY23 and continued to sharply increase across all states in FY23. WA led the growth in refinancing, which was up 29.5% from FY22, followed by SA (+19.4%) and QLD (+17.4%).
PEXA’s Mortgage Insights Report, which analyses the latest mortgage trends across new loans and refinances in the mainland states of NSW, VIC, QLD, WA, and SA in FY 23, compared to the past four years as well as the market share across the major and non-major banks, found that major banks held a leading market share for refinances across all states in FY23, which was highest in WA (68.7%).
“New lending activity declined across the board in FY23 which reflects the property market normalising to pre-pandemic levels, after an exceptional boom across all mainland states over the previous two years,” said Mike Gill (pictured above), PEXA’s head of research.
“By contrast, we’ve seen refinancing figures continue to trend upwards over the past three years with particularly strong increases since the RBA began to raise interest rates from May 2022. The rise in refinancing activity in FY23 has also been boosted by the high proportion of recent borrowers who had taken out fixed-term loans over the preceding few years.”
Gill said these borrowers were now rolling off their low interest, fixed-term loans, leaving them open to a better deal.
“The lure of attractive incentives offered by many of the major banks over the year to entice borrowers to switch lenders, is clearly working,” he said.
A deeper look into the data revealed that the major lenders came out on top in FY23 when it came to market share for loan refinances, with an increase of 1.9% nationally. The same was true for new loans, with major banks growing their share the most in NSW, by 3.1%, PEXA reported.
“In an environment of rising interest rates we have seen intense competition between lenders, with the major banks fighting hard to attract new customers – and they’ve been successful,” Gill said.
Download Mortgage Insights Report.
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