Refinancing activity has remained elevated in 2023, following a record high in December.
In the week ending April 2, PEXA’s Refinance Index of loan refinancing volumes was at 164.4 points in seasonally adjusted terms – that’s up by 22.7% from the same week in 2022 and 58% higher than the same week in 2021. The original (unadjusted) PEXA refinance index jumped to 234.4 points, the second-highest recorded.
PEXA Refinance Index, Jan. 3, 2020 to April 2
Note: original and seasonally adjusted index of refinancing volumes per week
PEXA said an increasing number of mortgage borrowers are seeking refinancing options in Australia’s competitive mortgage market, even if their loans are not yet due for renewal, in response to the rapid rate hikes April since 2022.
Earlier this week, the Reserve Bank paused the rate hikes, holding the cash rate steady at 3.6%. But although the pause will be very welcome news to mortgage holders, PEXA said the effects of the previous rate rises in this cycle are yet to fully wash through.
The “rate rises have contributed to falling average property prices and sales volumes nationwide, following record peaks in both pricing and sales volumes in early 2022,” said Julie Toth (pictured above), PEXA chief economist. “A cyclical floor already seems to be forming in property market pricing in our largest cities, but this has not yet flowed through to other locations. Today’s pause will assist in stabilising prices.
“The lower volume of homes listed for sale in the face of ongoing demand pressure is providing some support for property pricing, which is good news for sellers. However, it is exacerbating widespread availability and affordability problems for prospective home buyers. Housing availability constraints look set to continue until Australia’s chronic lack of housing supply can be addressed.
“PEXA’s latest Property Now article, ‘Australia's Resilient Housing Demand’, notes that Australia’s demand for housing has remained remarkably resilient, despite the impact of higher interest rates and inflation since 2022. This reflects strong adult population growth and falling average household size (people per household) over a long period. Both of these trends have been amplified by the disruptions caused during the COVID pandemic. Adult population growth is now surging again due to a rapid recovery in net arrivals (permanent and long-term), while smaller households still seem to be preferred by many Australians.”
Toth said RBA continues to flag the possibility of further rate hikes this year, but the pace is set to slow, “with smaller monthly increases and/or pauses potentially on the horizon as we reach the top of the current rate rise cycle.”
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