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Australia’s love affair with fixing ends as refinancing surges

Australia’s love affair with fixing ends as refinancing surges

New borrowers have turned their backs on fixed rate home loans, according to ABS lending indicator data released today.

The proportion of fixed loans funded in the month of May was just 12 per cent, in seasonally adjusted terms, and comes as banks rapidly hike fixed rates. This includes both new loans and refinancing.

At the peak in July 2021, 46 per cent of all new loans were fixed.

Fixed v variable ABS May

Source: RateCity.com.au, ABS Lending Indicators May 2022, released 4 July 2022, seasonally adjusted data includes refinancing.

RateCity.com.au research director, Sally Tindall said, “Australia’s brief love affair with fixing is over, with the ultra-low COVID rates now long gone.”

“With the majority of big four bank fixed rates now starting with a ‘5’ or a ‘6’, borrowers are returning to variable home loans,” she said.

Other key May ABS lending indicator statistics out today:

  • New lending was up 1.7% month-on-month, but likely to drop in coming months as the property market cools.
  • Total value of refinancing was the second highest on record, with owner-occupier refinancing at a record high.
  • Average new loan size decreased in NSW, SA, WA, Tasmania and the Northern Territory, however, nationally it went up slightly.
  • First home buyer numbers increased by 2.3% month-on-month but decreased 31.6% from the same time a year ago.

The total value of new home lending rose in May, but likely to drop in coming months

The overall value of new home loans has seen a moderate rise in May, however, the ABS has attributed this to a backlog.

Sally Tindall said: “The value of new home loans will likely drop as the property market cools, with the weekend’s clearance rates at just 55 per cent across the combined capitals, according to CoreLogic.”

“Many Australians who were looking to buy have now pressed pause, waiting for prices to drop further before jumping in,” she said.

Value of new home loans approved in May

Value

Monthly changeYear-on-year change
TOTAL

$32.37 billion

$544 million

1.7%

-$144 million

-0.4%

Owner-occupier

$21.18 billion

$445 million

2.1%

-$2.28 billion

-9.7%

Investor

$11.18 billion

$99 million

0.9%

$2.14 billion

23.7%

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

The number of first home buyers rises in May

The number of owner-occupier first home buyer loans increased by 2.3 per cent month-on-month in May.

However, year-on-year, the numbers have dropped by almost 32 per cent, with 4,708 fewer first home buyers in May 2022 than May 2021.

“With 35,000 new places in the federal government’s First Home Guarantee scheme now open, we could see first home buyer numbers increase,” Sally Tindall said.

“However, young Australians buying with wafer-thin deposits need to be aware of the risks and make sure they are prepared for their repayments to continue to climb as the RBA keeps hiking.”

Owner-occupier first home buyers in May

AmountMonthly changeYear-on-year change
Number of loans

10,211

233

2.3%

-4,708

-31.6%

Value of loans 

$4.98 billion

$162 million

3.4%

-$1.80 billion

-26.5%

Source: ABS Lending Indicators May 2022, released 4 July 2022, seasonally adjusted data.

Refinancing soars as borrowers try to combat rising rates

The total value of refinancing rose by 3.1 per cent in May, with owner-occupier refinancing hitting a record high.

Sally Tindall said: “There has been a surge in borrowers refinancing their home loans, locking in a lower rate to combat the RBA rate hikes.”

“While across the board variable rates are rising, many banks are offering sharper rates and big cashbacks for customers willing to refinance,” she said.

Total (May 22)Change from previous monthYear-on-year changeChange since COVID (March 2020)

$17.10 billion

$518 million

+3.1%

$2.43 billion

+16.6%

$6.38 billion

+59.5%

Source: ABS Lending Indicators May 2022, released 4 July 2022, seasonally adjusted data. 

Refinance May ABS

Average new loan size drops in 5 states as property market cools

While the national average new loan size for owner-occupier dwellings rose slightly in May, it has fallen in five states: NSW, SA, WA, Tasmania and the Northern Territory.

In NSW, the average new mortgage size dropped by $5,273 in May but is still $68,868 higher than a year ago.

Average new owner-occupier loan size: May

Average loan sizeChange monthlyChange from

1 year ago

National

$615,310

$4,156

0.7%

$65,812

12.0%

NSW

$780,762

-$5,273

-0.7%

$68,868

9.7%

VIC

$643,067

$5,799

0.9%

$75,175

13.2%

QLD

$536,289

$8,837

1.7%

$76,906

16.7%

SA

$459,262

-$8,023

-1.7%

$59,226

14.8%

WA

$466,846

-$4,643

-1.0%

$35,656

8.3%

TAS

$445,781

-$1,997

-0.4%

$57,953

14.9%

NT

$410,730

-$16,247

-3.8%

$1,271

0.3%

ACT

$599,898

$3,577

0.6%

$63,436

11.8%

Source RateCity.com.au, ABS lending indicators, May 2022, original data for owner-occupier dwellings. Includes construction and the purchase of new and existing dwellings.

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This article was reviewed by Head of Public Relations Laine Gordon before it was published as part of RateCity's Fact Check process.

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