"These areas are likely more exposed to rising interest rates," expert says
The outer suburbs of Australia’s largest cities are seeing a spike in refinancing as rising interest rates spur customers to shop around for the best mortgage deal.
Tarneit, a suburb in Melbourne’s west, has seen the largest number of mortgages refinanced since the beginning of the year, according to data from PEXA. Tarneit was followed by Werribee, southwest of the Melbourne CBD, Craigieburn in the north and Cranbourne East in the southeast, The Australian reported.
In New South Wales, refinancing activity was highest in Kellyville, on Sydney’s northwestern fringe, followed by Box Hill. Piara Waters, a suburb south of Perth, saw the highest refinancing level in Western Australia.
The data did not include Queensland, where postcode data isn’t mandatory for refinancing, The Australian reported. The PEXA report covers only instances in which owners switch banks.
Mike Gall, research head at PEXA, said the areas with the highest refinancing activity were outer suburban areas “with high levels of development”.
“These areas are likely more exposed to rising interest rates, with borrowers in these postcodes motivated to look for a better deal on their home loan,” Gall told The Australian.
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The Reserve Bank’s most recent rate hike, which took the cash rate to 2.35%, is likely to spur more households to seek refinancing “as mortgage-holders seek out discounts and cheaper solutions,” Gall said.
“Even before the most recent lift in the cash rate, PEXA’s refinancing index had already hit a record high in the week ending September 4,” Gall said. “A clear correlation is evident between this year’s interest rate rises and mortgage refinancing activity, indicating that households are responding directly and proactively.”
In June, a record $18.16 billion of mortgages were refinanced, according to data from the Australian Bureau of Statistics.
Sally Tindall, research director at RateCity, told The Australian that families “feeling the squeeze” from the RBA’s repeated hikes were likely to be the ones refinancing.
“These people know they don’t have to take their rates lying down,” Tindall said. “They’re being proactive. Banks are frequently cutting rates for new customers, and you’d be amazed how quickly a customer can have a stale rate … they take advantage of the loyal and complacent borrowers.”
