New report reveals mortgage trends shows Aussies tightened their belts in 2023

In 2023, the Australian property market witnessed a distinctive shift, as homeowners and investors navigated the changing financial landscape.

According to PEXA's latest Mortgage Insights Report, the total amount borrowed for property purchases across Australia was $300.9 billion, marking a 12.7% decrease from the previous year.

This trend reflects the dual impact of rising interest rates and escalating cost of living pressures.

The refinancing surge: finding better mortgage deals

Amidst these challenges, homeowners actively sought more favourable mortgage terms, leading to an 11.4% increase in refinancing activity.

With a total value of $220.4 billion, refinanced loans climbed significantly from the prior year.

Mike Gill, PEXA’s Head of Research, suggests that refinancing activity may have peaked in 2023, aligning with the upward trend in interest rates and the proliferation of fixed-rate loans in previous years.

The Reserve Bank's rate increase to 4.35% in November 2023, following a three-month pause, typically would boost refinancing.

However, the timing may have limited homeowner response ahead of the year-end holiday season.

Property purchases and financing: a detailed look

The report reveals that Australians invested a staggering $613.0 billion in property purchases in 2023.

While new lending accounted for $300.9 billion, a significant portion ($312.1 billion) was financed through alternative means, such as cash purchases, deposits, or non-property-attached loans.

Every mainland state experienced a decline in new lending, with New South Wales (NSW) and Victoria (VIC) seeing the largest drops to $109.5 billion and $84.1 billion, respectively.

Meanwhile, Queensland (QLD) and Western Australia (WA) showed relative stability in this area.

In a notable shift, median loan values in NSW and VIC saw a decrease for the first time since the pandemic, falling to $647,000 and $497,000, respectively.

Conversely, QLD's median loan value rose to over $464,000, signalling strong demand in the region.

Meanwhile, the commercial lending sector in Australia's eastern states saw a 13.4% reduction in new loan volumes, with NSW and VIC experiencing significant declines.

In contrast, QLD emerged as a leader in new commercial loans.

Other key findings

• NSW topped the chart in new loan values, with $109.5 billion borrowed, followed by VIC at $84.1 billion.
• Median residential new loan values in NSW and VIC dropped, indicating improved buyer affordability.
• WA emerged as the most resilient market in new loans, with a marginal 5.2% decrease compared to larger declines elsewhere.
• In refinancing, NSW led in value, while VIC saw the highest number of refinances, indicating a proactive response from homeowners in these states.
• WA showed the most significant growth in refinances, a 20.7% increase from 2022.

A final note

The 2023 landscape of Australian property finance was marked by cautious borrowing, increased refinancing, and regional variations in lending and property purchases.

As we navigate 2024, these trends offer valuable insights for investors, homeowners, and industry observers alike.

About Chris Dang Chris Dang is an accountant by training and has worked in the Financial Planning industry for many years. Chris brings together property, accounting, and financial planning experience to help clients of Metropole Wealth Advisory create a holistic plan for their wealth.