Fixed-rate cliff ‘so far failed to materialise’: PEXA

Although PEXA’s Refinance Index has revealed a decline of 1.7 per cent in weekly refinancing volumes (as of 3 October) from September, it still remained at “close to record highs” as borrowers are adjusting to higher interest rates and avoiding the fixed-rate cliff, according to PEXA chief economist Julie Toth.

Refinancing volumes hit a record high during the first week of September, with the Index hitting 212.3 points during the week ended 3 September.

Furthermore, the Index has revealed that refinancing volumes remained 16.7 per cent higher than the same week in 2022, more than double the volume of refinancing mortgage holders when compared to the lowest periods during the COVID-19 pandemic (April to May 2020 and February to March 2021).

Ms Toth stated that the “much-hyped threat of a ‘mortgage-cliff’” faced by an estimated 800,000 borrowers has “so far failed to materialise in 2023”.

“PEXA’s latest refinancing data shows Australians continue to refinance their loans at record rates,” Ms Toth said.

“This is helping to cushion mortgage holders from sharp rate rises and gives them time to adjust their spending to accommodate higher repayments.”

She added that the housing market recovery is gaining momentum, with “prices, listings and sales all gathering pace through September”.

Ms Toth further remarked that the RBA’s decision to pause the cash rate at 4.1 per cent during the October board meeting will give “greater confidence in the housing outlook, particularly among the majority of buyers who rely on mortgages to finance their homes.”

“Looking ahead, the RBA continues to warn that further rate rises may be necessary during FY24,” Ms Toth said.

“Australia’s domestic economy is still exhibiting elevated demand pressures – and inflation risks – across our urban housing markets and in key segments of essential consumer services (such as transport, health services and childcare).”

In line with PEXA’s data, the Australian Bureau of Statistics’ (ABS) latest Lending Indicators data revealed that owner-occupier refinance activity dropped to 26,539 loans in the month of August following record-high levels in July, when 28,041 borrowers refinanced during the fixed-rate cliff.

The external refinancing value for total housing also fell, down 3.9 per cent to $20.6 billion, with owner-occupier refinances dropping by 3.3 per cent to $14 billion and investor refinances down by 5 per cent to $6.6 billion.

However, refinancing values were still over 12 per cent higher than the same period last year.

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