Home loan refinancing levels reach record high

The value of owner-occupier refinancing between lenders has risen to a new high of 9.1%, with an increase of $13.4 billion in November 2022 (seasonally adjusted).

Meanwhile, total new loan commitments for housing fell 3.7%, according to new data released on January 13y by the Australian Bureau of Statistics (ABS).

Dane Mead, acting ABS head of finance and wealth, said more borrowers switched lenders for lower interest rates as the RBA’s cash rate target continued to rise.

So far, this month’s value of loan commitments has continued to decline from record high levels seen earlier in 2022 with new owner-occupier loan commitments falling 3.8% in November, while new investor loan commitments fell 3.6%.

“The number of owner-occupier dwelling commitments also continued to fall in November to below the pre-pandemic level for the first time,” Mead said.

Meanwhile, the number of new loan commitments to owner-occupier first home buyers fell 5.5% in November 2022, which drove the overall fall in owner-occupier lending. First home buyer loans in November were 51% below their January 2021 peak and 16% below the February 2020 pre-pandemic level.

The ABS reported the value of total new loan commitments for fixed term personal finance fell 1.3% in November 2022, which was driven by a 9.3% fall in lending for personal investment. Lending for the purchase of road vehicles fell 2.9%.

There was a 5.1% rise in lending for the purchase of household goods to a new all-time high, while lending for travel and holidays remained slightly higher than pre-pandemic levels.

On Thursday, Brisbane broker Tom Uhlich of Boss Money weighed in on the refinance boom, telling Australian Broker there was slight panic in the market with many wanting to refinance to “low” fixed rates that no longer existed.

“We have also seen a segment that are refinancing for cash out to hold as a buffer for the rocky road ahead (which is a strange concept), getting cash-out at higher rates to help cope with higher rates,” Uhlich said.

“Since late 2022, we contacted our clients and had them work out their repayments at 6%. Then we suggested they set up a separate account and pay in the difference between their low fixed rate and 6%, so that way they are training themselves to make repayments at the higher rate.”

New research by Mortgage Choice revealed on Tuesday that one in three mortgage holders plan on refinancing their home loan in 2023.

Mortgage Choice CEO Anthony Waldron said the broker franchise network was seeing growing confidence among Australian borrowers when it came to refinancing and this had resulted in a strong increase in borrowers exploring refinancing options.

“This is especially true when borrowers are feeling the pain of rising rates and if you’re considering refinancing your loan, it pays to speak with a broker,” Waldron said.

“As well as simplifying the refinancing process, they can also easily review a large range of lenders for customers. The research showed us that, on average, borrowers who refinanced with a broker saved $409 on their monthly repayments, compared to $249 for borrowers who went direct to their lender. These amounts can make a big difference over time.”

From AustralianBroker

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