All mainland states record a decline in new lending
Australians secured $300.9 billion in new loans for property acquisitions, a 12.7% decrease from the previous year, as interest rate hikes and rising living costs weighed on the property market, new PEXA research has revealed.
PEXA’s latest Mortgage Insights Report, focusing on the five mainland states, shows a national total of 461,979 new property purchase loans and 452,025 refinanced loans in 2023. This shift, PEXA said, can be attributed to climbing interest rates, with the total value of refinanced loans reaching $220.4 billion, marking an 11.4% increase from the year before.
The report also highlighted that $613.0 billion worth of property was bought across the country in 2023. Of this, new lending accounted for $300.9 billion, with the remainder coming from cash contributions or alternative financing methods.
Meanwhile, all mainland states recorded a decline in new lending, with New South Wales and Victoria experiencing significant drops to $109.5 billion and $84.1 billion, respectively. In contrast, Queensland saw an increase in median loan values to over $464,000, driven by a high number of sale settlements, indicating robust demand within the state.
For the first time since the onset of the pandemic, median loan values fell in New South Wales and Victoria to $647,000 and $497,000, respectively.
In the commercial sector, new loan volumes in Australia’s eastern states dropped by 13.4% in 2023, with New South Wales and Victoria witnessing substantial decreases of 20.7% and 16.3%, respectively. This shift resulted in Queensland becoming the leading state for new commercial loans, surpassing its larger counterparts.
“While all Australian mainland states experienced significant growth in refinancing volumes during 2023, there was a notable decline in the final quarter of the year,” said Mike Gill (pictured), head of research at PEXA. “This late decline suggests that Australian refinancing activity may have peaked, in response to the strong upswing in the interest rate cycle in 2023 and in line with the surge in fixed rate loans in the preceding two to three years.
“The Reserve Bank raised official interest rates by 0.25% to 4.35% in November of 2023, after pausing for the prior three months. Typically, rate hikes spur refinancing activity as homeowners seek better options for their home loans,” Gill said. “However, the timing of this rate increase, so close to the end of the year, may have hindered many homeowners from taking action before the Christmas break.
“We also saw the median loan value fall for the first time since the pandemic in our two largest states. These declines indicated a slight improvement in buyer affordability, with Aussie buyers now setting their sights on borrowing smaller amounts to fuel their property purchases.”
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