New PEXA report reveals the latest mortgage market trends
There were significant changes in the Australian loan market for fiscal year 2024, with PEXA Group’s latest Mortgage Insights Report showing the end of the refinancing surge driven by low-interest fixed rate loans.
While new loan volumes increased, PEXA said refinancing activity declined as the market adjusted to the expiry of a high volume of fixed-rate, fixed-term loans taken out two to three years ago.
A total of 509,955 new property-related loans were issued in FY24, a 6% increase compared to FY23. Victoria led national demand for property loans, with 136,461 new loans in FY24, despite more property transactions being settled in Queensland and New South Wales.
The PEXA report also revealed an 11.9% decline in refinancing activity, with 396,653 refinances completed in FY24 for loans valued at $211.2 billion, a 0.8% drop in aggregate value over the year. This decline marks the end of the refinancing peak that occurred during FY23, when an unusually large number of fixed-rate, fixed-term loans expired.
The June 2024 quarter saw a significant rise in new loans with 141,872 new loans issued, a 25.1% increase from the previous quarter. This surge was concentrated in New South Wales and Victoria, with increases of 35.8% and 26.1%, respectively. Refinancing volumes also increased in the June quarter compared to the March quarter, despite an overall decline for the year.
Growth in new loans in the June quarter can be partly attributed to a weaker March quarter, influenced by earlier-than-usual Easter holidays that likely delayed settlements to April. Consequently, new loan volumes in April were 32.3% higher compared to the previous year. This seasonal fluctuation, PEXA said, also affected the timing of refinanced loan activity in the second half of FY24.
According to Julie Toth (pictured above), chief economist at PEXA Group, the increase in new loans and the decline in refinancing activity through FY24 signified a shift in property market dynamics as the economy moved beyond the disruptions of COVID-19 and the subsequent period of rapid interest rate adjustments.
“Rising interest rates and stagnant incomes posed challenges for many home buyers and borrowers in the first half of FY24,” Toth said. “But as we moved through the year, resilience in the labour market and greater stability in interest rates helped to boost buyer confidence.
“When we look at the differences in loan activity across locations, FY24 saw an unusually high volume of new loans in Victoria. Anecdotal evidence suggests this may be related to an exodus of property investors responding to rising state taxes and residential tenancy regulation changes, and a rising proportion of owner-occupier buyers, who are more likely to require a new loan to finance their purchase.
“Looking ahead, FY25 is expected to see improvements in household confidence, consumption, and investment, supported by income tax cuts, receding inflation, and real income recovery. As the property market adjusts to these changes, ongoing growth in loan and refinancing volumes is anticipated.”
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