External refinancing skyrockets as first-time homebuyers drop like flies

The value of external refinancing hit a new high in July as mortgage holders seek better mortgage rates.

New home loans, however, slowed from their previous highs, as the number of first-time buyers fell sharply (see section below).

External refinancing

A total of $ 17.22 billion in mortgages was refinanced in July, according to ABS lending indicators released today. This is an increase of $ 978 million (6.0%) from the previous month, in seasonally adjusted terms.

Refinancing has been on the rise since the 2019 cash rate cuts. However, the trend has accelerated in recent months, with customers moving toward low rates in case they rise.

Value of loans refinanced from outside in July

Amount in July 2021 Monthly change Change from year to year Change since 2 years

$ 17.22 billion

– the highest ever

$ 978 million

6%

$ 6.45 billion

60%

$ 8.71 billion

102%

Source: ABS Lending Indicators July 2021, published September 2, 2021, seasonally adjusted data. The annual variation is from July 2020 to July 2021, and the 2-year variation is from July 2019 to July 2021.

A new data set released today by ABS shows the proportion of fixed-rate loans increased from 15.5% in July 2019 to 47.1% in July 2021.

The popularity of fixed rates has been on the rise since the Big Four banks cut their fixed rates in response to the emergency cash rate cut on March 19, 2020.

RateCity.com.au’s research director, Sally Tindall, said the record level of refinancing was driven by notable increases in fixed rates, especially for terms of 4 and 5 years.

“The recent spike in refinancing is likely to be driven, at least in part, by fear of missing out on a good rate,” she said.

“We expect this increase in refinancing to continue as locked out mortgage holders use this time at home to give their finances a spring cleaning.

“According to the RBA, the average homeowner existing on an adjustable rate loan pays 3.07 percent, but there are currently 181 mortgage rates offered below 2 percent.

“If your mortgage rate starts with a ‘3’ it might be time to jump on the refinancing bandwagon or at least pick up the phone and haggle with your current lender,” she said.

New loan

The value of new homeowner loans fell for the second month in a row, down 0.4% or $ 89 million from the previous month, in seasonally adjusted terms.

The decline in homeowner loans was offset by the continued increase in investor loans for the ninth consecutive month. The value of loans to investors reached $ 9.35 billion in July, up 1.8% from June and the highest level since April 2015.

The first buyers continued to exit the overheated real estate market. The value of first-time homeowner loans was down $ 1.23 billion from the January high, in seasonally adjusted terms.

Value of new home loans approved in July

Rising Monthly change Change from year to year
TOTAL

$ 32.12 billion

$ 75 million

0.2%

$ 13.03 billion

68.2%

Owner occupied

$ 22.77 billion

– $ 89 million

-0.4%

$ 8.38 billion

58.3%

Investor

$ 9.35 billion
highest since April 2015

$ 164 million

1.8%

$ 4.64 billion

98.7%

Source: ABS Lending Indicators July 2021, published September 2, 2021, excluding refinancing, seasonally adjusted data. The monthly variation is from June 2021 to July 2021 and the annual variation is from July 2020 to July 2021.

First homeowner buyers

Rising Monthly change Change since peak

(January 2021)

Loan value

$ 5.84 billion

– $ 481 million

-7.6%

– $ 1.23 billion

-17.4%

Number of loans

12 930

-939

-6.8%

-3 327

-20.5%

Source: ABS Lending Indicators July 2021, published September 2, 2021, excluding refinancing, seasonally adjusted data.

Ms Tindall said investors continued to hunt homeowners in July, especially those looking for their first home.

“The sharp drop in first-time buyers is worrying. They are dropping heated auctions en masse, as bidding wars exceed their budgets, ”she said.

“It’s hard to see when the first home buyers will make a comeback in this climate.

“As the growth in property prices begins to slow down, asking prices are still too high for many Australians trying to get their first foot on the property ladder,” she said.


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