FY24 Unwinds from Fixed-Rate Loan Refinancing Peak – PEXA research
By PEXA - 24 July 2024
Melbourne, Australia: PEXA Group’s latest Mortgage Insights Report has reported a significant shift in the Australian loan market during FY24, marking the end of the refinancing surge driven by low-interest fixed-rate loans. While new loan volumes increased, refinancing activity declined as the market adjusted to the expiry of a high volume of fixed-rate, fixed-term loans taken out two to three years ago.
A total of 509,955 new property-related loans were issued in FY24, a 6.0% increase compared to FY23. Victoria led national demand for property loans, with the highest volume of new loans in FY24 (136,461), despite more property transactions being settled in Queensland and New South Wales.
In contrast, refinancing activity saw an 11.9% decline, with 396,653 refinances completed in FY24 for loans valued at $211.2 billion (-0.8% in aggregate value over the year). This drop signifies the end of the refinancing peak that occurred during FY23, when an unusually large number of fixed-rate, fixed-term loans expired.
The June 2024 quarter experienced a significant rise in new loans with 141,872 new loans issued, a 25.1% increase from the previous quarter. This surge was concentrated in NSW and VIC, with increases of 35.8% and 26.1% respectively. Refinancing volumes also picked up again in the June quarter compared to the March quarter, despite falling in total over the year.
Growth in new loans in the June quarter can be attributed, in part, to a weaker March quarter, influenced by earlier than usual Easter holidays that likely delayed settlements to April. Consequently, new loan volumes in April were 32.3% higher compared to the previous year. This seasonal fluctuation also affected the timing of refinanced loan activity in the second half of FY24.
PEXA Group’s Chief Economist, Julie Toth, said the increase in new loans and the decline in refinancing activity through FY24 signified a shift in property market dynamics as we move beyond economic disruptions of COVID-19 and the subsequent period of rapid interest rate adjustments.
“Rising interest rates and stagnant incomes posed challenges for many home buyers and borrowers in the first half of FY24. But as we moved through the year, resilience in the labour market and greater stability in interest rates helped to boost buyer confidence.
“When we look at the differences in loan activity across locations, FY24 saw an unusually high volume of new loans in Victoria. Anecdotal evidence suggests this may be related to an exodus of property investors responding to rising state taxes and residential tenancy regulation changes, and a rising proportion of owner-occupier buyers, who are more likely to require a new loan to finance their purchase.
“Looking ahead, FY25 is expected to see improvements in household confidence, consumption and investment, supported by income tax cuts, receding inflation, and real income recovery. As the property market adjusts to these changes, ongoing growth in loan and refinancing volumes is anticipated,” said Ms Toth.
Read PEXA’s Mortgage Insights Report