RBA's eighth straight rate rise driving record refinance volumes
Data & Insights

RBA's eighth straight rate rise driving record refinance volumes

By Julie Toth - Chief Economist • Dec 2022

Today the Reserve Bank of Australia (RBA) announced its eighth consecutive increase to the cash rate, raising the cash rate by a further 25 basis points (bp), taking it from 0.1% in April to 3.10% today.

This large and rapid series of rate rises is being felt directly by all variable-rate mortgage holders. As a result, PEXA’s Refinance Index continues to show extremely elevated levels of mortgage refinancing activity, even as PEXA’s Mortgage Insights confirms fewer new loans for residential and commercial property purchases.

PEXA’s Refinance Index, week ending 6 December:

  • 177.9 points, up +0.4% from the previous week (seasonally adjusted)
  • Up by 8.1% from the same week year-on-year
  • Hovering close to the recent peak of 179.5 points seen in September 2022

PEXA Chief Economist, Julie Toth, said: “The latest RBA decision raises the cash rate by 300 bp in just eight months, taking it to its highest level since 2012. This is the largest and fastest rate rise ever implemented by the RBA. The relatively direct transmission of interest rate rises to mortgagees will continue to take ever larger chunks of disposable income away from mortgage-bearing households into 2023.

“Looking ahead, the RBA continues to flag the possibility of further rate rises in the new year in order to tame excessive domestic demand in our resource-constrained economy. We note further rises are not yet a fait accompli, as globally the latest monthly indicators of inflation in the US showed some very welcome hints of levelling out. Locally, we are not seeing evidence of a prices-and-wages inflation spiral, which would necessitate further tightening.

“PEXA’s research indicates that rising interest rates are driving record numbers of borrowers to refinance their loans, with PEXA’s Refinance Index hovering near its recent record high at 177.9 points (seasonally adjusted) in the week ending 6 December 2022. Our consumer research confirms a strong appetite for Australians to shop around for the best loans possible. This is warranted, given that consumers can save an estimated $1,524 per year on average by seeking out new financing options. This is in addition to cash-backs and other incentives being offered to refinancers by major home loan providers.

“For renters who aspire to break into home ownership, local house prices might be falling, but their maximum loan size is becoming progressively smaller as rates increase. We are now seeing fewer people moving from renters to first-home-owners, and at lower average price points. This places further pressure on rental markets, at a time when rental availability and affordability are at record lows in many locations.

For more information, visit PEXA data & insights. 

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