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Owner-occupier refinancing sets new record

The number and value of owner-occupier refinances hit a new record high in May, with new lending also returning to growth.

A total of 30,807 owner-occupier loans were refinanced in the month of May, new data from the Australian Bureau of Statistics (ABS) has shown — marking the first time that more than 30,000 loans have been refinanced in any given month.

According to the Lending Indicators data for May, the value of external refinancing for owner-occupier housing also hit a new record, rising 8.6 per cent over the month to $14.1 billion.

The previous high was set in March 2023, when $14.09 billion was refinanced.


Refinancing levels for owner-occupiers were 21.0 per cent higher than in May 2022, when the interest rate hiking cycle first started.

Investor refinances also rose over the month, increasing 7.2 per cent to $6.8 billion. While this was 25.6 per cent higher compared to a year ago, it was less than the record $7.08 billion set in March 2023.

Overall, total housing refinances were therefore up 8.1 per cent, to just over $21 billion — 22.4 per cent higher compared to a year ago.

Mish Tan, the head of finance statistics at the ABS, noted that refinance levels were hitting new highs as borrowers continued to switch lenders amid an environment of increasing interest rates.

Indeed, the cash rate hit an 11-year high of 3.85 per cent in May 2023, however, that was surpassed in June, when the cash rate moved to 4.1 per cent — with expectations that the cash rate may rise again today (4 July).

New mortgage lending returns to growth

As well as growth in refinancing, new lending was also back on a growth path following a fall of 1.0 per cent in April.

According to the ABS, the value of new loan commitments for housing rose 4.8 per cent to $24.9 billion in May 2023.

Owner-occupier mortgage commitments rose 4 per cent to $16.4 billion but were down 20.2 per cent on the same month last year.

New investor loans grew more rapidly, at 6.2 per cent on the month (to $8.5 billion) — the largest monthly increase in two years — but were down 20.9 per cent on May 2022 levels.

Despite this, when compared to pre-COVID-19 pandemic levels (February 2020), the value of new owner-occupier dwelling loan commitments was 17.0 per cent higher in May 2023, while the number of commitments was 0.2 per cent lower. The average value of these loans has risen by 21.8 per cent (in original terms) over this period.

First home buyer loan commitments also rose in May (by 2.7 per cent) after having fallen 0.3 per cent in April. This was 17.4 per cent lower compared to a year ago.

The value of home lending rose in every state and territory in May, with the largest increases seen in the Northern Territory (+13.5 per cent) and NSW (+9.4 per cent). The smallest increases in mortgage value growth were in Queensland (+2.8 per cent) and Western Australia (+2.9 per cent).

Mortgage uptick may be short-lived

Noting the figures, Westpac’s senior economist Matthew Hassan said the “solid” mortgage growth of 4.8 per cent was slightly ahead of the bank’s forecast of 4 per cent.

“More broadly, gains since the low in February are consistent with the price-led recovery being seen in established markets and, more recently, signs of an uptick in new construction, albeit with all housing metrics coming from a weak starting point,” he said.

“The detail shows rises across all borrower segments borrowers and states, the monthly profile again suggesting that some of the softness in April may have been due to Easter-timing effects.”

He added that Westpac expects total housing credit growth will bottom out at around 4.5 per cent [over the year] in coming months but could be affected by shifts in repayment behaviour.

“The key question continues to be around the extent to which the upturn can be sustained given high interest rates, the further increase in rates in recent months, and prospect of additional RBA moves,” Mr Hassan said.

“With price gains also coming off low volumes, the recovery still looks susceptible to stalling, especially if higher rates trigger a rethink in terms of price expectations and/or we start to see a lift in ‘on-market’ supply (for more discussion on dwelling prices and turnover.”

Similarly, the Commonwealth Bank of Australia had expected a rise of 3 per cent in new housing lending, so the figures were stronger than expected.

Economist Stephen Wu suggested the new refinancing record was likely fuelled by “the rapid [increases] in interest rates” and the fixed-rate roll-off, which has been “incentivising refinancing as borrowers look for lower variable rates to move to after their fixed rate expires”.

CBA noted that the strong home lending data — coupled with approvals data — would likely be factored into its cash rate decision for July, but it still expects the RBA to leave the cash rate on hold “in a line ball decision”.

“The deceleration in the monthly CPI should be enough for the RBA to pause its hiking cycle. Although [the] stronger housing-related data could, together with a tight labour market and lingering inflation concerns, tip the decision the other way,” the major bank’s economics team said.

Meanwhile, AMP’s deputy chief economist Diana Mousina said that she expected housing lending to start weakening again as the RBA “continues to lift interest rates from here” (with AMP forecasting a hike in the cash rate today, to 4.35 per cent).

[Related: Bank loan books grow to over $2.1tn]

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