RBA rate hikes set to continue record-high levels of refinancing

Australian Bureau of Statistics (ABS) lending indicators, released following the RBA’s decision, highlight that a large portion of borrowers are switching lenders, with refinancing hitting another record high of $18.88 billion in August, a 5.3 per cent month-on-month increase in seasonally adjusted terms. 

Ms Tindall explained that “an increasing number of borrowers will start rolling off their ultra-low fixed rates over the course of the next year, many of which will consider refinancing at this time”.

However, she said many borrowers run the risk of being locked in “mortgage prison”, which she outlined could be a result “of rising rates and falling property prices …[or] because they don’t pass the bank’s serviceability test or they don’t have enough equity in their loan”. 

She detailed how falling house prices have invited first home buyers back into the market, with the number of home loans settled increasing 10.4 per cent month-to-month in August, showcasing how debut buyers are “finally getting a look in”.

“It’s possible many first home borrowers were patiently waiting for the latest round of places to open up in the federal government’s scheme to help first home buyers with small deposits,” she said. 

July saw an extra 35,00 spots for the First Home Guarantee Scheme opened, which affords first home buyers with the chance to purchase a home with as little as a 5 per cent deposit.

“We could see another rise in the number of first home buyers in the next couple of months, despite the market downturn,” Ms Tindall said.

Conversely, investors are retreating from the market, with the total value of new lending falling 3.4 per cent month-on-month to $27.39 billion, with Ms Tindall adding that “the value of investor loans dropped by 4.8 per cent month-on-month in August”.

She concluded that “this data indicates many investors still have their plans on ice, while they see exactly how high rates will go and whether prices will fall further”.