Borrowers Rushing to Refinance as Housing Loan Growth Figures Spike

Owner-occupiers are refinancing their home loans in record numbers, desperately trying to get the best deal possible while interest rates rise and the cost of living bites.

There were well over 30,000 new refinanced loans in Australia for the month of May alone, and it’s easily the highest monthly figure we’ve ever recorded.

It isn’t just owner-occupiers that are currently keen to seek better terms on their loans either, with investors increasing home loan refinances by around 7 per cent in May.

When you combine the monthly figures of both owner-occupiers and investors the total value of housing refinances rose by 8.1 per cent, to over $21 billion and that’s 22 per cent higher than at the same time last year.

The month of May also saw a return to rising numbers of new loans after retreating slightly in April.

The Australian Bureau of Statistics figures show new loans for housing increased by nearly 5 per cent to $24.9 billion in May, with both new owner-occupiers and new investors both on the up.

Economists were largely surprised by the strong growth figures but say there’s no guarantee the uptick will last.

“More broadly, gains since the low in February are consistent with the price-led recovery being seen in established markets and, more recently, signs of an uptick in new construction, albeit with all housing metrics coming from a weak starting point,” Westpac senior economist Matthew Hassan told Mortgage Business.

“The detail shows rises across all borrower segments borrowers and states, the monthly profile again suggesting that some of the softness in April may have been due to Easter-timing effects.

“The key question continues to be around the extent to which the upturn can be sustained given high interest rates, the further increase in rates in recent months, and prospect of additional RBA moves.

“With price gains also coming off low volumes, the recovery still looks susceptible to stalling, especially if higher rates trigger a rethink in terms of price expectations and/or we start to see a lift in ‘on-market’ supply (for more discussion on dwelling prices and turnover.”

Commonwealth Bank economist Stephen Wu said the figures were stronger than he expected and were likely driven by the Reserve Bank’s aggressive hikes to interest rates.

Mr Wu told Mortgage Business the rapid increases in interest rates and the fixed rate roll-off was providing an incentive for borrowers to refinance and look for lower variable rates once their fixed rate terms had expired.


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