Melbourne, Australia: The Reserve Bank of Australia’s (RBA) decision to hold the cash rate steady at 4.10% for a second consecutive month today, has increased the likelihood that Australian borrowers may be experiencing the peak in the current rate-rising cycle.
PEXA Chief Economist, Julie Toth, said today’s pause will be welcome news for mortgage holders and property buyers.
“This longer pause will allow Australia’s property and mortgage markets to stabilise and recover, following an unusually rapid sequence of rate rises over the preceding 12 months. National property market indicators suggest prices and transaction volumes have been recovering from their recent trough, since around March. This extended pause in monetary policy tightening will help to inject a greater degree of confidence and stability into housing markets, for sellers, buyers and builders,” Ms Toth said.
“For Australians who already hold a mortgage for their own home or for investment properties, current credit pricing and conditions are prompting greater numbers of loan-holders to seek better financing options within Australia’s competitive mortgage market,” she said.
PEXA’s Refinance Index shows loan refinancing volumes have risen strongly since April 2023. It hit a new record high of 203.2 points in the week ending 30 July 2023 (seasonally adjusted). The data shows refinancing volumes are:
- up by 4.1% from one month earlier;
- up by 19.8% from the same week in 2022; and
- double the volume of refinancing activity during the lowest periods in April-May 2020 and Feb-March 2021 (chart 1).
Chart 1: PEXA Refinance Index, national, 3 Jan 2019 – 30 July 2023
Seasonally adjusted index of Australian refinancing volumes, per week
“While our data shows national refinancing volumes hit new highs this quarter, PEXA’s latest Property Insights Report for FY23 also confirms that monthly property settlement numbers (and in many locations, property sale prices) have been recovering from their recent slump, from around March 2023 onwards. The 2023 financial year finished strongly with more than 66,000 property settlements recorded in the month of June – up from 58,000 in May and 48,000 in April – and signalling a rebound in settlement volumes. In total, more than 665,000 property settlements were recorded nationally in FY23, which was 18.6% lower than the previous boom year of FY22 (754,352) but 11% higher than immediately prior to the COVID pandemic in FY20,” Ms Toth said.
“Looking ahead, the RBA continues to flag the possibility of another rise later this year in order to bring local inflation closer to the target band of 2-3% and to align Australian interest rates more closely to those prevailing internationally. The probability that we are now at or near the peak in this tightening cycle is growing because the rate rises to date have already been enough to help bring headline inflation down to 6% y/y in the June quarter, and to just 3½ %y/y on an annualised basis. This is already within sight of the RBA’s upper target range of 3%. So far this reduction in inflation has been achieved without unwanted side-effects such as rising unemployment and loan defaults.
“If this path is maintained, then the more damaging impacts on households from high inflation and rising interest rates will begin to dissipate,” she said.
For more information and PEXA research reports, visit https://www.pexa.com.au/content-hub/
For more information, please contact:
Danielle Tricarico – Head of Corporate Affairs, PEXA
M: 0403 688 980
PEXA (Property Exchange Australia) is a world-leading, digital property exchange and data insights business, listed on the Australian Stock Exchange. As an Australian start-up success story, PEXA assists members, such as lawyers, conveyancers and financial institutions, to lodge documents with Land Registries and complete financial settlements electronically. Since 2014, more than 15 million property settlements have occurred via PEXA, and today, more than 85% per cent of all property transfer settlements in Australia are processed on the PEXA platform. PEXA has recently expanded its refinancing capability to the UK and operates an insights business that helps government, and businesses, unlock the future value of property.