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Refinancing down but not out as new home lending stages a comeback

Eden Radford avatar
Eden Radford
- 3 min read
Refinancing down but not out as new home lending stages a comeback

The value of refinanced loans dropped in the month of August, but still recorded the fourth highest total since the start of the hikes, after climbing to a record high in the previous month.

This month’s slowdown was expected as many borrowers considering refinancing rushed to get their applications in before three of the four major banks wrapped up their cashback offers.

Since the start of the hikes almost $309.17 billion worth of loans have been refinanced as borrowers seek relief from the rate hikes.

Total value of refinancing – August 2023

Aug-23Monthly changeYear-on-year changeTotal since start of hikes
(May 22 – June 23)
$20.58 billion-$831 million

-3.9%

+$2.27 billion

+12.4%

+$309.17 billion

Source: ABS Lending Indicators August 2023, released 3 October 2023, seasonally adjusted data.

Total value of loans refinanced – last five years

Source: ABS Lending Indicators, external refinancing only, seasonally adjusted data.

Owner-occupiers back in market

Owner occupiers drove more than $16.07 billion of new home loan approvals for August, up 2.6 per cent from the month before, and a strong pick up after two consecutive decreases.

Investors also continued to keep activity moving, with an increase of 1.6 per cent.

Both owner-occupier and investor new lending, have however, decreased since the same time last year.

Value of new home loans approved in August

ValueMonthly changeYear-on-year change
TOTAL$24.82 billion+$543 million-$2.5 billion
2.2%-9.4%
Owner-occupier$16.07 billion+$407 million-$2.3 billion
2.6%-12.5%
Investor$8.75 billion+$136 million-$268 million
1.6%-3.0%

Source: ABS lending indicators for August 2023, released 3 October 2023, seasonally adjusted data.

Borrowers opting for fixed rates drop slightly

After two months of increases, the proportion of new and refinanced loans opting for fixed rates dropped to 8 per cent in August 2023, it is also well down from the peak of fixing in July 2021 which was 46 per cent.

The change likely comes as borrowers looked ahead to potential cash rate cuts.

Value of new loans: fixed vs variable

Source: ABS lending indicators for August,2023, released 3 October, original data.

RateCity.com.au research director, Sally Tindall, said: “Refinancing might have dropped, but it is nowhere near game over. The latest ABS figures show over $20 billion worth of home loans refinanced in the month of August, which is the fourth highest on record.”

While some of Australia’s biggest banks have turned their backs on the cutthroat refinancing market, there are plenty of smaller lenders offering competitive rates, and in some cases, cashback in a bid to tempt more borrowers to,” she said.

“Unsurprisingly, the proportion of new and refinanced loans opting for a fixed rate dropped in August as borrowers opt to stick on variable rates until they get a clearer picture of where the cash rate will settle.

“Many borrowers are opting to stay shackle-free on a variable rate for now until they see if and when the forecasted rate hikes materialise,” she said.

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Product database updated 22 Jun, 2024

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.