Borrowers respond quickly to lower rates as lenders ramp up competition
The Reserve Bank’s first interest rate cut in more than four years has triggered a lift in mortgage refinancing, as competition among lenders shows early signs of intensifying, according to PEXA.
New data from the digital property exchange firm indicates refinancing activity climbed in February, with further strength seen into March. The increase follows last month’s RBA decision to lower the cash rate to 4.1%, marking its first rate reduction since late 2020.
According to PEXA, refinancing across mainland states rose 8.4% year-on-year in February. Although volumes remain below the highs of 2023, they continue to track well above pre-pandemic levels.
PEXA chief economist Julie Toth (pictured above left) said the rise was largely due to borrowers reacting swiftly to the rate cut. “It’s telling us quite a bit about how many people are responding quite quickly to a rate change,” Toth said. “I think over the last five years in particular we have seen Australian consumers become more proactive in seeking out cheaper loans at every opportunity.”
State-level data showed Western Australia leading with a 29% increase in refinancing compared to a year earlier, followed by Queensland (16%), South Australia (14%) and New South Wales (4%). Victoria saw a 1% decline.
Canstar data insights director Sally Tindall (pictured above right) noted that while overall refinancing activity remained elevated in recent quarters — even during periods of rate stability — the market is seeing a shift in how lenders are competing. “Three of the big four banks are now in a digital arms race, jostling to steal customers from each other, but only those customers willing to apply digitally,” she said.
More than $206 billion in loans have been refinanced in 2024 so far, despite the RBA holding rates steady until last month.
Analysts also see early signs of increased pricing pressure among lenders. Jarden’s Matthew Wilson highlighted recent changes by Westpac, National Australia Bank and Suncorp, stating that pricing tension appears to be returning to the mortgage market, though there is little to suggest a material mortgage pricing war.
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