Refinancing soars and first home buyers make a comeback

A growing number of borrowers are switching lenders with refinancing hitting another record high, according to ABS lending indicators released yesterday.

A total of $18.88 billion worth of home loans were refinanced in August, up 5.3 per cent month-on-month, in seasonally adjusted terms.

Total refinancing – August 2022

Source:RateCity.com.au, ABS Lending Indicators August 2022, released 4 October 2022, seasonally adjusted data.

RateCity.com.au research director, Sally Tindall, said: “We expect the refinancing boom will continue for a number of months as borrowers look for a way to combat rising rates.”

“An increasing number of borrowers will also start rolling off their ultra-low fixed rates over the course of the next year, many of which will consider refinancing at this time,” she said.

“The concern is many borrowers may find it difficult to refinance as a result of rising rates and falling property prices, rendering them in mortgage prison.

“Some borrowers could find themselves in mortgage prison because they don’t pass the bank’s serviceability test or they don’t have enough equity in their loan,” she said.

First home buyers make a comeback

First home buyers have made a comeback, with the number of loans settled increasing by 10.4 per cent month-on-month in August.

Although the number is still down significantly year-on-year, with 26 per cent fewer first home buyers entering the market than in August 2021.

Owner-occupier first home buyers – August 2022

Source: ABS Lending Indicators August 2022, released 4 October 2022, seasonally adjusted data.

Sally Tindall said: “With property prices dropping as rates rise, first home buyers are finally getting a look in.”

“It’s possible many first home borrowers were patiently waiting for the latest round of places to open up in the federal government’s scheme to help first home buyers with small deposits,” she said.

An extra 35,000 spots opened up for first home buyers in the First Home Guarantee in July, where the government acts as the guarantor for first home buyers who take out loans with deposits as low as 5 per cent.

“We could see another rise in the number of first home buyers in the next couple of months, despite the market downturn.” she said.

Investors continue to retreat as the value of new lending falls

The total value of new lending dropped another 3.4 per cent month-on-month to $27.39 billion.

Sally Tindall said: “Property investors continue their retreat with the value of investor loans dropping by 4.8 per cent month-on-month in August.”

“This data indicates many investors still have their plans on ice, while they see exactly how high rates will go and whether prices will fall further,” she said.

Value of new home loans approved in August

Source: ABS Lending Indicators August 2022, released 4 October 2022, seasonally adjusted data. Annual change is Aug 2021 to Aug 2022. Excludes refinancing.

Just 4% of borrowers took out a fixed rate in August

Sally Tindall said: “Borrowers have continued to turn their back on fixing, with the proportion of fixed loans funded in August dropping to just 4 per cent – light-years below COVID levels.”

“At the peak in July 2021, when borrowers could lock in rates under 2 per cent, 46 per cent of all new loans were fixed,” she said.

These figures include new loans and refinancers.

Average new loan size falls in 7 states

As property prices drop, the average new loan size has fallen month-on-month in seven states in August.

Average new owner-occupier loan size in August

Source: ABS lending indicators, Aug 2022, original data for owner-occupier dwellings. Includes construction and the purchase of new and existing dwellings.

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