Refinancing hits a new record high as borrowers combat rising rates

The value of refinanced home loans has hit a new record high, as borrowers take action to mitigate rising interest rates.

Lending indicator data released today from the ABS shows a whopping $19.87 billion worth of mortgages were refinanced in February, in seasonally adjusted terms – the highest monthly amount in Australian history.

This means since the start of the hikes (May 2022) a total of $185.35 billion worth of loans have been refinanced.

Total value of refinancing – February 2023

Source: ABS Lending Indicators February 2023, released 3 April 2023, seasonally adjusted data.

Source: ABS Lending Indicators February 2023, released 3 April 2023, seasonally adjusted data.

New home lending continues to fall

The value of new home loans approved dropped again in February by $212.6 million, or 0.93 per cent compared to the previous month in seasonally adjusted terms.

This is the 13^th consecutive month the value of new mortgages has fallen, although the pace is slowing.

Value of new home loans approved in February 2023

Source: ABS Lending Indicators February 2023, released 3 April 2023, seasonally adjusted data. Annual change is Feb 2022 to Feb 2023. Excludes refinancing.

Source RateCity.com.au, ABS Lending Indicators February 2023, released 3 April 2023, seasonally adjusted data. Excludes refinancing.

First home buyer numbers drop yet again, but some spending more

The number of owner-occupier first home buyer loans dropped again in February, down 3.45 per cent from the previous month, and down 29.90 per cent from the same time a year ago.

However, the value of owner-occupier first home buyer loans increased $32.3 million, or 0.93 per cent, in February, month-on-month.

Owner-occupier first home buyers – February 2023

Source: ABS Lending Indicators February 2023, released 3 April 2023, seasonally adjusted data.

Fixed loans remain out of favour

The proportion of new and refinanced loans opting for a fixed rate in February clocked in at 5 per cent, in dollar terms.

This is the fourth month in a row where just 5 per cent of loans were fixed, and still dramatically down from the peak in July 2021 when 46 per cent of all new and refinanced loans were fixed.

Source RateCity.com.au, ABS Lending Indicators February 2023, released 3 April 2023.

RateCity.com.au research director, Sally Tindall, said: “Borrowers have come out swinging against rising rates, which is fantastic to see.”

“Soaring mortgage rates have hit family budgets hard, however, many are using the competition in the market to neutralise some of the rate pain,” she said. 

“While CBA, NAB and ANZ have all increased variable rates for new customers in the last month, the market is still incredibly competitive for borrowers looking to switch, particularly if they’re willing to go beyond these big banks.

“The average owner-occupier who hasn’t negotiated their rate since the start of the hikes is likely to be paying 6.36 per cent, yet there are still seven lenders offering variable rates under 5 per cent – that’s a difference of over five standard RBA hikes. 

“While first home buyer numbers continued to drop in February, what’s even more concerning is that the value of loans written for the month went the other way. It’s a double whammy for anyone looking to enter the market right now. 

“Rising rates coupled with property prices is a near-impossible equation for many would-be buyers looking to get into a housing market that’s suffering from a lack of stock,” she said.

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