Record Refinancing as Rate Rises Force Borrowers’ Hand

Refinance volumes, fuelled by rising interest rates and cost of living pressure, eclipsed new loans for the first time in three years in the nation’s biggest markets.

According to research from PEXA, New South Wales, Victoria, Queensland and Western Australia had more refinancing than new loan for the first time since early 2020.

The finding was contained in the quarterly PEXA Mortgage Insights Report, which analyses the nation’s property refinance activity, as well as new loans.

The report found 98,527 refinances were completed in those states—nearly 2000 more than the 96,767 new loans issued during the same period.

New loans had not previously dipped beneath 100,000 in a quarter since June, 2020—the onset of Covid.

According to the report, all states posted year-on-year growth in refinances, as borrowers continue to scramble for more favourable deals on their home loan to mitigate rising mortgage repayments on the back of another Reserve Bank of Australia rate rise this month.

The growth in refinances was in stark contrast to the challenging market conditions for new lending.

New loans to fund the purchase of property were down 17.9 per cent on the December, 2022 quarter and 25.3 per cent below the figure posted in the prior year.

This was compounded by average loan amounts also trending lower over the period in a softer sales market.

PEXA head of research Mike Gill, said that un the current market climate, with financial headwinds putting strain on borrowers, “we are continuing to see exceptionally high refinancing activity across the nation—so much so that these volumes have exceeded new loans, which is not something we’ve seen before”.

“This elevated refinancing activity is likely to continue due to the unusually high number of fixed-term loans that will be expiring in the next two years.

“It will also likely be supported by the RBA strongly flagging the possibility of more rises later this year, in order to bring inflation closer to the target band of 2 to 3 per cent.”

Queensland recorded the most residential new loans in the March 2023 quarter with 28,428.

▲ Victoria lead the way with the most refinancing deals in the past quarter.

Victoria followed with 25,841 and NSW with 24,148. However, all states experienced significant falls.

NSW posted the highest average loan amount at $852,782 in the quarter.

The NSW average was down 8.4 per cent compared to the prior year, with Victoria and Queensland down 6.9 per cent and 3.8 per cent respectively.

A total of $60.5 billion in new lending was issued during the quarter across NSW, Victoria, Queensland and WA.

Of this, $54.2 billion was for residential property and the remaining $6.3 billion for commercial.

 Meanwhile, Victoria recorded the most refinances in the March 2023 quarter.

More than 35,000 refinances were completed in Victoria, which was up 29.7 per cent year-on-year.

WA experienced the highest growth in refinances, up 35.9 per cent year-on-year. The state posted 10,943 refinances during the quarter.

The median refinanced loan amount across the four states was largely unchanged over the past year.

NSW had the highest median at $492,000 and WA the lowest at $355,000.