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Aussies scale back on property borrowing, opt for refinancing amid rate hikes


Australians showed prudence in property borrowing throughout 2023, with borrowing rates dipping and refinancing rates soaring, influenced by interest rate hikes and the rising cost of living. Data from PEXA’s latest Mortgage Insights Report revealed a significant contraction in the value of new loans for property purchases, totalling $300.9 billion for the year—a 12.7% decline from the previous year. In contrast, refinancing activities recorded an 11.4% increase, indicating homeowners’ quest for better mortgage deals.

The comprehensive report covered loan activity across the five mainland states of Australia in 2023, documenting a total of 461,979 new loans issued by Australian lenders for property purchases. Additionally, it noted the refinancing of 452,025 existing loans. The uptick in refinancing, with a total aggregate value reaching $220.4 billion (up by 11.4% from the previous year), was spurred by rising interest rates, prompting more Australians to seek favourable terms for their existing loans.

PEXA’s research also highlighted the total property purchases across the nation in 2023, amounting to $613.0 billion. While buyers borrowed $300.9 billion in new lending to fund these acquisitions, the remaining $312.1 billion was covered through cash or alternative financing methods.

State-specific data showed a universal decline in new lending, with the most significant drops recorded in NSW and VIC, amounting to $109.5 billion and $84.1 billion, respectively. Loan median values experienced a downturn for the first time post-pandemic, indicating a slight improvement in affordability, with NSW and VIC seeing median loan values reduce to $647,000 and $497,000, respectively. QLD, however, bucked the trend with an increase in median loan value to over $464,000, supported by the highest volume of sale settlements in any state for the year.

Mike Gill, PEXA’s Head of Research, remarked on the findings, stating that “while all Australian mainland states experienced significant growth in refinancing volumes during 2023, there was a notable decline in the final quarter of the year.” He attributed this late-year decline to interest rate developments and noted the potential peak in refinancing activity in response to the rising interest rates. Gill also commented on the Reserve Bank’s decision to raise the official interest rates by 0.25% to 4.35% in November 2023, after a three-month hiatus, as a factor influencing refinancing decisions.

In the commercial lending sector, the report observed a 13.4% dip in new loan volumes across Australia’s eastern states in 2023, with NSW (-20.7%) and VIC (-16.3%) experiencing substantial drops. Consequently, QLD outperformed the larger states with the highest count of new commercial loans for the year.

Overall, the report’s new loan highlights reaffirmed NSW as leading in value of new loans in 2023, with VIC following closely. It signaled a market shift towards more affordable borrowing options amid economic pressures. Refinance highlights pointed to NSW and VIC leading in value and volume of refinanced mortgages, with WA showcasing the strongest growth in refinancing activities during the year.

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