Refinancing takes a $2 billion hit – but heat not out just yet

The value of refinanced loans took a tumble in April, recording a $2 billion drop compared to the previous month.

The latest ABS lending indicators released today show a total of $19.3 billion worth of loans were refinanced in the month of April in seasonally adjusted terms.

While this was the lowest level since December of last year, the volume of loans switching lenders was still $2.4 billion higher than it was a year prior in April 2022.

Total value of refinancing – April 2023

Source: ABS Lending Indicators Apr 2023, released 2 June 2023, seasonally adjusted data.

Refinancing down but by no means out

It has been a strong year of activity in the refinancing market with a total of $226 billion worth of loans refinanced in the 12 months since the rate hikes began (May 2022 – April 2023).

Source: ABS Lending Indicators Apr 2023, released 2 June 2023, seasonally adjusted data.

Value of new home loans hits the skids again

The value of new home loans approved dropped in April, coming in at 3 per cent lower than the previous month, in seasonally adjusted terms. This comes on the back of a 5.3 per cent rise in March. 

Owner-occupiers were down by 4 per cent, while investors fell by just under 1 per cent, compared to the previous month.

Value of new home loans approved in April 2023

Source: ABS Lending Indicators Apr 2023, released 2 June 2023, seasonally adjusted data. Annual change is Apr 2022 to Apr 2023. Excludes refinancing.

Average new loan sizes climb but still lower than a year ago

Despite the then 10 cash rate hikes, buyers took on larger debts in April than they did, on average, in March.

The biggest increase was in South Australia, which saw a 6.5 per cent rise, with New South Wales recording a 2.2 per cent rise. Western Australia and Tasmania both recorded drops in the average new loan sizes from the previous month, compared to the previous month.

The average loan size is lower in every state recorded, compared to a year ago before the rate hikes, with the exception of South Australia.

Average new loan size in April 2023

Source: ABS Lending Indicators Apr 2023, released 2 June 2023, seasonally adjusted data. Monthly change is March to April 23. Annual change is April 22 to April 23.

Owner-occupier first home buyers continue to slow

After a sharp monthly rise of 16.5% in March, the number of buyers making their first property purchase dropped in April, albeit slightly, down less than 1 per cent from the March figures. 

Owner-occupier first home buyers – April 2023

Source: ABS Lending Indicators April 2023, released 2 June 2023, seasonally adjusted data.

Borrowers still keeping fixed rate loans at arm’s length 

Fixed rates continue to remain on the nose for most borrowers. This month just 5 per cent of new and refinanced loans were fixed, in dollar terms, down from 6 per cent in the previous month.

Source: ABS Lending Indicators Apr 2023, released 2 June 2023, original data. 

RateCity.com.au research director, Sally Tindall, said: “Refinancing might be down but it is most certainly not out, with over $19 billion worth of loans switching lenders in just one month.”

“We’ve seen an incredible amount of activity in the last 12 months, with a gobsmacking $226 billion worth of loans refinanced, but it’s been led by proactive borrowers who have been able to negotiate competitive deals,” she said.

“With the peak of fixed rate borrowers still to come off their contracts in the next few months, we expect refinancing will remain at elevated levels.

“That said, some borrowers who go to refinance will find themselves stuck in mortgage prison because they can’t pass their new bank’s serviceability test at higher rates.

“This is a problem that’s only going to get worse if there’s one, potentially even two more rate hikes, unless APRA steps in and provides these borrowers with a way out.

“At this stage, APRA’s 3 per cent stress test remains in place for both new and existing borrowers.

“With the cash rate nearing the peak, a stress test of 3 per cent is questionable for new borrowers, for refinancers already in the system, it makes even less sense.

“APRA needs to relook at their guidance and consider reducing the stress test for refinancers to release borrowers in mortgage prison from woeful rates.”

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