More refinances than new loans in Q1 | Mortgage Insights report March 2023 quarter

Refinance volumes, fuelled by rising interest rates and cost of living pressure, eclipsed new loans for the first time since early 2020 in New South Wales, Victoria, Queensland and Western Australia, according to the latest research from PEXA.

The quarterly PEXA Mortgage Insights Report analyses the nation’s property refinance activity, as well as new loan trends within the residential and commercial property sectors, and loan-to-value ratios for new residential loans.

98,527 refinances were completed in the aforementioned states – nearly 2,000 more than the 96,767 new loans issued during the same period.

New loans had not previously dipped beneath 100,000 in a quarter since June 2020 – the onset of the COVID-19 pandemic.

All states posted year-on-year growth in refinances, as borrowers continue to scramble for more favourable deals on their home loan to mitigate rising mortgage repayments, on the back of another Reserve Bank of Australia rate rise this week.

The growth in refinances was in stark contrast to the challenging market conditions for new lending. New loans to fund the purchase of property were down 17.9% on the December 2022 quarter and 25.3% below the figure posted in the prior year.

This was compounded by average loan amounts also trending lower over the period in a softer sales market.

PEXA’s Head of Research, Mike Gill, said: “In the current market climate, with financial headwinds putting strain on borrowers, we are continuing to see exceptionally high refinancing activity across the nation – so much so that these volumes have exceeded new loans, which is not something we’ve seen before. This elevated refinancing activity is likely to continue due to the unusually high number of fixed-term loans that will be expiring in the next two years. It will also likely be supported by the RBA strongly flagging the possibility of more rises later this year, in order to bring inflation closer to the target band of 2-3%.”

New loan highlights

• QLD recorded the most residential new loans in the Mar-23 quarter with 28,428. VIC followed with 25,841 and NSW with 24,148. However, all states experienced significant falls.
• NSW posted the highest average loan amount at $852,782 in the Mar-23 quarter.
• The NSW average was down 8.4% compared to the prior year, with VIC and QLD down 6.9% and 3.8% respectively.
• A total of $60.5B in new lending was issued during the Mar-23 quarter across NSW, VIC, QLD and WA.
• Of this amount, $54.2B was for residential property and the remaining $6.3B was for commercial.

Property refinance highlights

• VIC recorded the most refinances in the Mar-23 Qtr. Over 35K refinances were completed in VIC which was up 29.7% year-on-year.
• WA experienced the highest growth in refinances, up 35.9% year-on-year. The state posted 10,943 refinances during the Mar-23 quarter.
• The median refinanced loan amount across the four states was largely unchanged over the past year. NSW had the highest median at $492K, and WA the lowest at $355K.

For further enquiries and details about this report, our insights offering or PEXA Data, please contact: research@pexa.com.au.