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Refinancing hits a record high as new loan approvals continue to fall

By Georgina Shanahan

Rising rates are stressful for most mortgage holders and it is not surprising that the number of people shopping around for the best home loans has skyrocketed. In November, $19.5 billion of home loans were refinanced, the highest level on record and over 20 per cent higher than the same time last year.

The number of people refinancing has been increasing for some time, however, the drivers have changed. At the start of the pandemic, there was a spike as mortgage holders re-assessed their mortgages in a highly uncertain environment. As interest rates reduced quickly during the pandemic, there was again a rush to get the best deal with many people also moving on to fixed rate mortgages. Now, the driver again is uncertainty about how high rates will get with many people looking to reduce their repayments as much as possible as cost of living problems continue.
Interestingly, the growth in investors refinancing hasn’t been as marked as owner-occupiers. It may be that rising rents are providing a buffer to many investors, with income growth partly offsetting rising repayments.
While there is a rush to refinance, the volume of new loans continues to fall. While owner-occupier loans were still particularly high in November, they are on a sharp trajectory downwards. This is in part driven by fewer people wanting to buy, but also less stock on market. Investor loans are also continuing to head downwards and are now back to where they were in mid-2021. With interest rates expected to again see an increase in February, for now it looks like we will continue to see more refinancing of home loans, and a continual fall in the number of new home loans

Nerida Conisbee
Ray White Chief Economist

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