Refinancing made a strong comeback in May, jumping by $1.58 billion to reach a total of $20.97 billion.
This marks the second-highest monthly value ever recorded for external refinancing.
According to the latest ABS lending indicators, the total value of refinanced mortgages since the beginning of rate hikes has now reached $247 billion when adjusted for seasonal factors.
Total value of refinancing – May 2023
| May-23 | Monthly change | Year-on-year change | Total since start of hikes
(May 22 – May 23) |
| $20.97 billion | +$1.58 billion
+8.1% |
+$3.8 billion
+22.4% |
$247 billion |
Source: ABS Lending Indicators May 2023, released 3 July 2023, seasonally adjusted data.
New home lending is back on the rise as the property market continues to heat up
The value of new home loans, for both owner-occupiers and investors, went up compared to the previous month.
It saw a solid increase of $1.13 billion, or 4.8 per cent, when adjusted for seasonal factors, even with the rising cash rate.
However, it's worth noting that the figures for May were lower compared to the same time last year.
Back then, the impact of cash rate hikes hadn't kicked in yet, so it's natural to see a difference.
Value of new home loans approved in May 2023
| Value | Monthly change | Year-on-year change | |
| Total | $24.86 billion | $1.13 billion
+4.8% |
-$6.3 billion
-20.5% |
| Owner-occupier | $16.37 billion | $634 million
+3.9% |
- $4.1 billion
-20.2% |
| Investor | $8.5 billion | $497 million
+6.2% |
-$2.2 billion
-20.9% |
Source: ABS lending indicators for May 2023, released 3 July 2023, seasonally adjusted data.
More buyers get the green light for their first home
The number of owner-occupier first-home buyers increased by a modest 2.7 per cent compared to the previous month.
It seems that some buyers are choosing to tackle mortgage rate rises instead of facing higher rent costs.
However, when we look at the numbers from a year ago, there has been a decline in the number of first-home buyers in the market.
This drop can be largely attributed to the significant decrease in people's borrowing capacity caused by the RBA rate hikes.
To ensure financial stability, new home loan applications are usually stress-tested at a rate that's 3 per cent higher than the rate they applied for.
This means that in May 2022, buyers with a 10 per cent deposit taking out a variable rate loan from a major bank were likely stress-tested at 5.79 per cent.
Fast forward to today, and the stress test for a similar borrower has risen to 9.87 per cent.
Owner-occupier first home buyers – May 2023
| May-23 | Monthly change | Year-on-year change | |
| Number of loans | 8,352 | +222
+2.7% |
-1,754
-17.4% |
| Value of loans | $4.16 billion | +$216 million
+5.5% |
-$736 million
-15.1% |
Source: ABS lending indicators for May 2023, released 3 July 2023, seasonally adjusted data.
Variable loans continue to stay in favour
According to the latest data from the ABS, only five per cent of new and refinanced home loans were obtained at fixed rates.
Borrowers seem to be holding back and choosing the flexibility of variable rates, anticipating a potential drop in the cash rate in 2024, as predicted by several economists.
By keeping their options open, they aim to make the most of possible future rate reductions.
Source: ABS lending indicators for May 2023, released 3 July 2023, original data.
RateCity.com.au research director, Sally Tindall, said:
“The perpetually rising cash rate seems to have done little to dampen home-buying activity in the month of May.
The maximum amount people can borrow from the bank drops with every rate hike, yet property prices and home lending have continued to climb in recent months as a lack of stock keeps the pressure on prices.
It’s great to see refinancing back on the rise, hitting the second-highest level in ABS records.
The big four banks may be turning their backs on the refinancing market, but borrowers are still charging ahead.
The next few months will see thousands of borrowers come off their fixed rates and continue to drive refinancing activity.
While some people who borrowed at capacity may find themselves with limited options when they come off their fixed rate, CBA and Westpac’s lowering of the stress test for select refinancers has opened up the possibility of them now being able to refinance.
With the potential for up to three more rate hikes still to come, more banks will hopefully revisit their servicing policies for refinancers stuck in mortgage prison."
