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 1. Insights


IS THE HOME LOAN REFINANCING BOOM OVER?

Angus Moore, Senior Economist

Senior Economist

First published 8 Nov 2023, 11:12am



Homeowners have been refinancing their home loans in record numbers over the
past year and a half, but is the refinancing boom coming to an end?

The past few months has seen as many as 28,000 homeowners externally refinancing
to another lender every month, compared to pre-pandemic when around 15,000
owner-occupiers would change lenders in a given month. A further 11,000-12,000
investors have also been refinancing.



That level of activity is much higher than we’ve seen in the past couple of
decades.

This has been spurred by homeowners rolling off of pandemic-era low fixed rate
mortgages on to much higher variable rates.

Moving banks and refinancing at that point is attractive both because (1) the
roll off acts a salient trigger for people to review their home loan, and (2)
many will be rolling off on to variable rates that are higher than they could
get by refinancing.



That said, refinancing activity looks like it is finally starting to slow down.

The number of external refinances peaked in July, and by September had fallen
18% for owner-occupiers and 15% for investors.

That’s consistent with the peak of fixed rate expiries now being behind us. Just
under half of all fixed rate loans that were outstanding at the end of 2022 have
now ended and rolled off onto variable rates. That rollover peaked in June –
when a little over 6.5% of previously outstanding fixed rate mortgages expired.


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That slower rate of fixed rate expiries means refinancing activity will probably
continue to slow over the remainder of this year and into next.

While November and December will still see many homeowners rolling off their
fixed rates, it isn’t as many as we were seeing in the middle of 2023.

And as we head in to 2024, the number of fixed rate expiries will taper off
significantly – with most months seeing less than half as many fixed rate
expiries as in the middle of this year. That will take some of the heat out of
refinancing activity.


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