Refinancing home loan
The average size of a home loan accessed to refinance a home in Australian has grown, despite loans to buy or build shrinking in size. Image – Canva.
  • Size of home loans accessed for refinancing purposes has grown by 6.15% annually
  • Loans accessed for buying and building have shrunk however
  • Trend expected to continue into the new year with expectations the cash rate could surpass 3%

New data has shown an increase in the size of home loans Aussies are accessing to refinance their homes, amid rising interest rates and inflation concerns.

According to Australian home loans marketplace, the average refinancing home loan has grown in size in the lead-up to the RBA‘s cash rate announcement released yesterday.

The average size of a home loan accessed for refinancing via Joust’s ‘Refinance’ category reached $540,149 in October this year.

This represents a growth of 6.15% when compared with October 2021, when the average size of a refinancing loan was recorded as $508,838.

Despite growth in refinancing loans, data from Joust’s Live Auction service indicates the size of home loans accessed to buy or build a house is declining.

Home loans accessed via Joust’s ‘Buy’ category experienced an annual decline of 16.97% to October 2022, falling from $725,586 to $602,430.

Joust’s ‘Build’ category saw a similar annual descent of 11.17% in the same period, down from $767,243 to $681,538.

Buyers scramble to refinance as cash rate rises

Joust CEO Carl Hammerschmidt said the growing refinancing rates indicate many buyers were underprepared for the current conditions, marred by rising interest rates and inflation.

Inflation is at the forefront of minds with the September quarter bringing a 7.3% increase in the ABS Consumer Price Index.

The market has also slowed significantly with Corelogic data reflecting annual declines of 3.1% in national housing values and 9.3% in sales volumes in the year to October.

“The increase in people across most states looking to refinance larger home loans shows that those who got into the market during record low interest rates are now finding themselves over-extended.”

Carl Hammerschmidt, Joust CEO

Carl Hammerschmidt
Carl Hammerschmidt, Joust. Image –

So while loan sizes for the purpose of buying and building fall, we’ve seen people with larger loans looking on Joust for a better deal as not only mortgage repayments spike, but so do things like groceries, petrols and other day-to-day expenses,” said Mr Hammerschmidt.

South Australia lead the way in refinancing loan growth, with an astounding annual increase of 40.70% in the year to October.

The ACT and NSW followed suit with increases of 20.82% and 13% respectively.

Victoria and Queensland bucked the trend however with the size of refinancing home loans declining by 1.12% and 7.20% respectively.

According to Mr Hammerschmidt, this upwards trend in refinancing home loan sizes is expected to continue into the new year.

“With many economists predicting rates are likely to reach the mid 3% range by early 2023, what’s important for all mortgage holders to keep in mind at the moment is that it’s not too late to find a better deal.

The positive side of rising rates is that lenders are being forced to compete for not only new business but to keep existing business as well, it’s important to look at your refinancing options as soon as you can,” Mr Hammerschmidt concluded.

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