Rising interest rates driving record refinance activity
Data & Insights

Rising interest rates driving record refinance activity

By PEXA Insights • Oct 2022

News Release

A record 102,669 property refinances were completed across Queensland, New South Wales, Victoria and Western Australia during the September 2022 quarter, up 9% on the previous quarter, according to the latest analysis released today by PEXA.

The quarterly PEXA Mortgage Insights Report analyses the nation’s property refinance activity, as well as new loan adoption for residential and commercial property sectors, and loan-to-value ratios for new residential loans. The report also includes the latest data from the PEXA Refinance Index, which illustrates refinance activity has risen sharply since recording 134 points in early April 2022, to posting a national record of 179.6 points for the week ending 18 September 2022[1].   

All four states included in the report saw a strong increase in refinances from the previous quarter, with Victoria recording the highest volume with 36,982 properties refinanced from July to September, and Western Australia posting the highest growth of 13.5% (10,577 refinances) quarter-on-quarter. New South Wales completed 34,084 refinances during the same period, and Queensland came in at third position with 21,026 refinances.

Non-major banks continued their strong winning position for attracting refinance customers, most notably in Queensland, where major banks lost 1,059 more refinances than they won in the state during the September 2022 quarter.  

In line with the slowing of property sale settlements across the nation, 119,177 new loans were completed during the September 2022 quarter, which is a drop of 12% from the June 2022 quarter. The largest decline was seen in New South Wales with 30,345 new loans (-14.4% quarter-on-quarter). Victoria led the east-coast for volume with 34,118 new loans (-12.9% quarter-on-quarter), followed closely by Queensland with 33,670 new loans (-10.6% quarter-on-quarter). Victoria’s commercial sector also led the way, recording 1,601 new loans (+1.5% quarter-on-quarter).

In contrast to the refinance market, major banks dominated residential new loans in both Victoria (up a net 3,419 new loans) and New South Wales (up a net 2,799 new loans), however could not break the potential local market loyalty of Queenslanders, losing more new loans than they won in the state for the quarter.

PEXA’s September report also includes residential loan-to-value ratios (LVRs) for Victoria, New South Wales and Queensland the first time, with all three eastern states recording similar average LVRs across the quarter.

Average LVRs for residential new loans – in summary

  • New South Wales – average LVRs in the state for residential new loans dropped over the past year, reaching 77.0% in September 2022. LVRs in regional areas of the state were consistently higher than metropolitan regions.  
  •  Victoria – average Victorian residential LVRs also declined between 1-2% over the course of 2022, reaching 77.0% in September 2022. Similar to New South Wales, regional properties averaged higher LVRs over this period than metropolitan properties.
  • Queensland – average Queensland residential LVRs also trended around the 77% mark in September 2022, however unlike in Victoria and New South Wales, there was marginal difference between regional and metropolitan regions.

PEXA’s Head of Research, Mike Gill, said: “We continue to see heightened refinancing activity across the nation as Australians respond to rising interest rates by looking to reduce arguably their greatest expense, their monthly mortgage repayment.”

“The record levels of new loans seen throughout 2021 and early 2022 have slowed in the recent quarter, coinciding with a dip in property sale settlement volumes.”

“We have also seen a small drop in average loan-to-value ratios across Victoria and New South Wales over the past 12 months, with lenders tightening credit as interest rates rise, and this will ultimately impact the borrowing capacity for some home buyers,” said Mr Gill.

PEXA’s latest insights are published in the same week as the Commonwealth Government’s Federal Budget for 2022-23, with national housing availability and affordability, together with local inflation and ‘cost of living’ pressures at the forefront of policy priorities.   

PEXA’s Chief Economist Julie Toth, comments: “The economic context is unusually tricky for fiscal policy this year, with a deteriorating global and local outlook compounding concerns about living costs, housing, social services and skill shortages.”

“Rising interest rates and increasing cost of living pressures are having a direct impact on the Australian property market, as evidenced by the reduction in new loans quarter-on-quarter and the rise in refinancing activity to record highs. From here, we need to see fiscal policy operating in tandem with monetary policy in order to address inflation and limit the need for further rate rises. New affordable homes are needed urgently. Current flooding events are likely to exacerbate demand for affordable housing in regional areas of Victoria and New South Wales. It is critical that all housing affordability measures, from all levels of government, are well targeted, co-ordinated and designed.”

“The Commonwealth Government’s national target of building an additional one million new homes over the next five years from 2024 is welcomed. It will inject much-needed supply into the housing market, through a mix of public-sector and private-sector investment. The success of this initiative will depend upon its detail, and particularly the timing and geographic distribution of new affordable dwellings.”

“It will be critical that these new affordable homes are a genuine net addition to housing stocks, and they are located where they are most needed. Policies attached to this target must avoid displacing new homes that would have been built by the private sector anyway, regardless of government support,” said Ms Toth.

Julie Toth’s complete summary of housing-related measures in the Federal Budget can be found here.

For more information on the Mortgage Insights report, visit https://www.pexa.com.au/insights



For media enquiries please contact:
Danielle Tricarico
Head of Corporate Affairs
E: danielle.tricarico@pexa.com.au


About PEXA

PEXA (Property Exchange Australia) is Australia’s online property exchange network. Since 2014, more than 12 million transactions have occurred via PEXA, and today, more than 85% per cent of all property transfer settlements in Australia are processed on the PEXA platform.
[1] Seasonally adjusted: https://www.pexa.com.au/insights/refinance-index

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