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The September quarter saw a record 102,669 property refinances completed across Queensland, New South Wales, Victoria, and Western Australia, according to the latest PEXA mortgage insights report. The numbers reveal how Australians are responding to mounting interest rates: by looking to reduce what is “arguably their greatest expense – their monthly mortgage repayment,” said PEXA head of research Mike Gill.
PEXA’s quarterly report, which analyses new loan adoptions and loan-to-value ratios for new residential loans in addition to the country’s property refinance activity, has revealed a record number of completed property refinances across the four states, representing a 9% growth from the previous quarter.
Victoria recorded the highest volume of activity with 36,982 properties refinanced in the quarter, followed by New South Wales with 34,084 completed refinances and Queensland with 21,026 completed refinances.
Western Australia posted the quarter’s highest growth of 13.5% or 10,577 more refinances than the previous quarter.
Non-major banks continued to attract refinance customers. This was most evident in Queensland, where major banks lost 1,059 more refinances than they won between July and September this year.
As property sale settlements dwindled, new loans completed during the September quarter fell by 12% to 119,177 from the previous quarter, with all states recording double-digit drops in residential new loans. New South Wales saw the largest quarterly decline to 30,345 new loans (-14.4%), followed by Victoria with 34,118 new loans (-12.9%), and Queensland with 33,670 new loans (-10.6%).
Victoria’s commercial sector recorded growth in new loans of 1.5% from the previous quarter, with 1,601 new loans completed between July and September.
Major banks dominated residential new loans in Victoria and New South Wales but lost more new loans than they won in Queensland for the quarter, which PEXA attributed to the state’s potential local market loyalty.
The report also summarized the LVRs of New South Wales, Victoria, and Queensland.
For residential new loans, New South Wales saw an average LVR of 77% in September, consistent with the decline in LVRs in the state over the past year. PEXA noted that LVRs in regional areas of New South Wales were consistently higher than metropolitan ones.
In Victoria, the average residential LVRs also declined over the course of 2022 and reached 77% in September, with regional properties achieving consistently higher LVRs than metropolitan ones as well.
The average residential LVRs in Queensland also hovered around 77% in September, although there was minimal difference between regional and metropolitan properties.
“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,” Gill said. “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.”
PEXA’s latest insights came in time for the federal budget for 2022 to 2023, which put national housing availability and affordability at the forefront of policy priorities, alongside inflation and cost-of-living pressures.
PEXA chief economist Julie Toth said the economic environment made fiscal policy “unusually tricky”, as a deteriorating local and outlook compounded housing and skill shortages and cost-of-living concerns.
“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,” Toth said. “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.”
Toth welcomed the government’s national target of building an additional 1 million new homes over the next five years from 2024, saying it would inject a “much-needed supply” into the market.
“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,” Toth said.
