Customer Site
Property Insights and Reports

Refinances surge | homeowners feel pinch of rising rates

By PEXA Insights • 20 Feb 2023

PEXA Mortgage Insights Report 2022

Australians refinanced at record levels in 2022 with more than 378,000 refinances recorded in New South Wales, Victoria, Queensland and Western Australia, up 11.4% on the prior record year, driven by the fastest and steepest increase in the official cash rate on record.

As revealed in the latest PEXA Mortgage Insights Report published today, while refinancing activity continued to reach new heights, new loans taken out in 2022 to fund the purchase of a property were down 12.8% on 2021 levels, with just over 502,000 new loans being recorded across the four states.

In residential lending, Victoria led the country with the greatest volume of refinances, with over 134,000 refinances completed in the state in 2022, an increase of 7.7% compared to the previous year.

New South Wales had the highest average residential loan amounts in 2022, at $841,539, which were well ahead of Victoria (average of $629,900) and Queensland (average of $521,085). New South Wales also had the highest average loan-to-value ratio (LVR) in 2022, at 77.1%, followed by Victoria and Queensland with 76.9% and 76.8%, respectively.

In commercial lending, although slightly down compared to the previous year, Victoria saw the greatest volume of commercial lending activity, with more than 6,400 new commercial loans recorded in the state in 2022. Queensland experienced the highest growth in commercial lending, with 11.4% more new commercial loans taken out throughout 2022 compared to the previous year. South of the border in New South Wales, postcode 2000 in Sydney recorded the highest volume of new commercial loans, with 313 new loans recorded in 2022.

PEXA’s Head of Research, Mike Gill, said: “With PEXA’s Refinance Index hitting a record high in the week ending 25 December 2022, our latest PEXA Mortgage Insights Report sheds valuable insight into the how Australia’s refinance market was driven in 2022 by homeowners seeking a better deal on their mortgage.

As the report also shows, this growth in refinances partially offset the declines in new loans, a trend that reflects lower property settlement levels as sales come-off pandemic era record highs.”

PEXA’s Chief Economist, Julie Toth, added: “In 2022, new residential loan volumes fell back from 2021’s record highs in all three of Australia’s largest markets, but remained above pre-COVID levels. This reflects an immediate demand-side reaction from home buyers to the deliberate dampening effect of increasing interest rates during 2022 and to the peak in home pricing in most locations in this cycle. 

“Separate to rate rises, the level of activity continues to normalise, which was always expected, since some of the increase in home buyer demand through 2020 and 2021 was effectively ‘brought forward’ by HomeBuilder, first home buyer incentives, record low interest rates and other measures to temporarily support housing demand during COVID-19 and the cessation of population growth.

“In contrast, the number of refinanced loans (with a new lender) climbed to record highs through 2022, in all of Australia’s four largest states. Interest in mortgage refinancing was widespread and active in all markets, as mortgagees responded to rapidly rising interest rates immediately (and in some cases pre-emptively) by seeking out cheaper loan arrangements. This trend accelerated through 2022, as the Reserve Bank of Australia’s rate rises flowed through into variable loans in full.

“The average size of new loans increased in 2022 from previous years, reflecting the significant increase in median home prices over this period.”

For more information, visit PEXA data and insights. 

Related Articles

Subscribe now

Keep up to date with the latest insights and research reports delivered direct to your inbox.