aussies clamp down on their finances as home loan refinancing hits record high
Aussies clamp down on their finances as home loan refinancing hits second highest ever numbers. Image: Canva.
  • Over $19 billion refinanced
  • Second highest ever rates in December, the peak was in November
  • Buyers are slowing down as rate rises begin to bite

The latest Lending Indicators from the Australian Bureau of Statistics has found that the number of Australians who refinanced their home loans was at its second highest ever in December, with the previous month being the highest.

Cheap loans seem to be a thing of the past, with more and more Australians looking to get savvy with their home loans.

The small month-on-month dip was 1.5 per cent, with Australians refinancing some $19.1 billion. This, however, is up 18 per cent since the same time last year.

Owner-occupiers led the home loan pack, and while refinancing did fall 2.3 per cent, it still remained at an incredibly high $13 billion at the end of last year, compared to over $6 billion for investor loans.

The impact of rising interest rates and higher loan repayments have severely impacted all borrowers with Canstar’s analysis showing borrowers faced a 42 per cent increase in home loan repayments from May to December, adding $888 to repayments on a $500,000 loan over 30 years or $1,778 on a $1 million loan.

Refinancing from the average existing borrower rate of 5.98 per cent to the lowest ongoing variable rate of 4.29 per cent could save a borrower with a $500,000 loan over 30 years approximately $520 per month in repayments and more than $187,000 in interest over the life of the loan.

Canstar Group Executive Steve Mickenbecker said, “The level of refinancing is just down from November’s record high, but is up by a very healthy 18 per cent compared to a year ago.”

“Borrowers are acknowledging that the case for refinancing is overwhelming and are placing their loan up for grabs with a new lender, where the pickings are usually the greatest.”

“The average rate for borrowers who have not pestered their bank for a better deal over the past year is 5.98 per cent, which is 1.69 percentage points higher than the best ongoing rate in the market at 4.29 per cent. Refinancing from the average to the lowest ongoing variable rate returns almost seven 0.25 per cent worth of rate rises to the borrower.”

Top 5 Lowest Ongoing Variable Home Loan Rates
Company Name Rate Savings Compared to Avg Variable Rate of 5.98%^
Monthly Repayment Total Interest Paid Over 30 Year Loan
The Mutual Bank Special Variable Rate LVR 60% to 80% 4.29%

4.29% comp rate

$520 $187,166
Unloan Home Loan  LVR <80% 4.44%

4.35% comp rate

$475* $182,054*
Hume Bank liteBlue Variable P&I 60-80% 4.49%

4.49% comp rate

$461 $165,914
Bank of Sydney BOSBasic Home Loan P&I ≤80% 4.54%

4.56% comp rate

$446 $160,561
MOVE Bank Straightforward Plus $500k+ 4.54%

4.59% comp rate

$446 $160,561
Source: Canstar – 3/02/2023. Based on owner occupier loans on Canstar’s database, available for a $500,000 loan, 80% LVR and P&I repayments; excluding introductory, first home buyer only and green only loans. Lowest rates selected based on rate, followed by comparison rate. Comparison rate calculated based on a loan amount of $150,000 and a loan term of 25 years. Repayment and interest calculations based on a $500,000 loan repaid over 30 years using P&I repayments. *Unloan calculations take into account the additional 0.01% discount that applies to the rate each year, with the repayments adjusting as the rate decreases. This means the savings in repayment compared to the Average Variable Rate will increase over the life of the loan to up to $522. ^Average Variable Rate of 5.98% based on the average pre-May cash rate of 2.98% with subsequent cash rate increases applied.

Contrary to many European countries and the United States, variable rates remain the choice of many Australians.

Canstar said “The vast majority of those refinancing, and also borrowers taking out new loans, are opting to ride out the rate rises on variable rates. The proportion of refinanced and new loans on a fixed rate is just 4.9% in December.”

“The heyday for fixed rate borrowing when rates were sitting around 2 percent are long gone, with the average three year fixed rate now reasonably aligned to the variable rate and sitting at 6.03 percent,” said Mickenbecker.

“At this stage in the interest rate cycle, the fear of becoming captive in a higher fixed rate if variable rates fall is outweighing the concern that variable rates could go higher.

“Borrowers who did fix two years ago at super low rates are starting to be faced with a moment of truth as fixed rates expire. Their repayments are set to almost double in one hit. We can expect a refinance boom as this plays out over the next two years.”

Rate rise weary buyers delay their purchase

Lending for new homes fell for the 11th consecutive month, ABS data showed it declined 4.3 per cent to $23.4 billion in December.

New owner-occupier loan commitments fell 4.2 per cent to $15.6 billion, while new investor loan commitments fell 4.4 per cent to $7.9 billion.

Sean Crick, ABS head of Finance and Wealth said, “In December 2022, the value of total new housing loan commitments was 23 per cent higher than the level seen in February 2020, prior to the COVID 19 pandemic. In December 2021, the value of these commitments was 74 per cent higher than the pre-pandemic level.”

“Interest rate increases are doing exactly what they are meant to be doing in the housing market. Demand for new lending is drying up and house prices are falling,” said Mickenbecker.

“With buyers anticipating further house price falls, investors, in particular, are feeling no urgency to pile into the market.

“The Reserve Bank is now waiting to see inflation and consumer spending respond before it takes its foot off the interest rate pedal.”

ABS Lending Indicators
Dec-21 Nov-22 Dec-22 Difference % Change
MoM YoY MoM YoY
Value of new housing commitments
Total Housing $33.16 billion $24.48 billion $23.44 billion -$1.04 billion -$9.72 billion -4.3% -29.3%
Owner Occupied $22.16 billion $16.23 billion $15.55 billion -$676.7 million -$6.61 billion -4.2% -29.8%
Investment $11.00 billion $8.25 billion $7.89 billion -$367.1 million -$3.11 billion -4.4% -28.3%
Value of refinancing to a new lender
Total $16.21 billion $19.41 billion $19.13 billion -$281.9 million $2.92 billion -1.5% 18.0%
Owner Occupied $10.73 billion $13.31 billion $13.01 billion -$304.7 million $2.28 billion -2.3% 21.2%
Investment $5.47 billion $6.09 billion $6.12 billion $22.8 million $641.2 million 0.4% 11.7%
Value and number of new construction lending for owner occupiers
Value $2.23 billion $1.91 billion $1.81 billion -$93.0 million -$413.8 million -4.9% -18.6%
Number 4,324 3,338 3,123 -215 -1,201 -6.4% -27.8%
Value and number of new lending for owner occupier first home buyers
Value $5.72 billion $3.84 billion $3.66 billion -$175.0 million -$2.05 billion -4.6% -35.9%
Number 11,931 7,979 7,646 -333 -4,285 -4.2% -35.9%
Source: Canstar. Based on ABS Lending Indicators, December 2022, seasonally adjusted figures unless otherwise indicated.


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