Over the last three years, Australia has experienced the largest ever boom in mortgage refinances.
This is boom is illustrated in the next chart, which is derived from Tuesday’s mortgage origination data from the Australian Bureau of Statistics (ABS):
As you can see, total annual mortgage refinances have increased from roughly $100 billion in 2019 to nearly $240 billion currently.
This growth has been driven by owner-occupiers, where mortgage refinances has risen from around $65 billion to $162 billion.
Investor mortgage refinances have also risen strongly, from around $41 billion to $76 billion currently.
Many homeowners have been forced to renegotiate fixed-rate mortgages they took out when interest rates were historically low during the pandemic:
These borrowers have switched from ultra-cheap fixed-rate loans of around 2% to variable rates of between 6% to 7%, prompting many to seek a better deal with another lender.
The mortgage refinancing boom will likely run until until the ‘fixed rate mortgage cliff’ has finished in early 2024:
This means that we have around six more months of booming mortgage refinances, with the mortgage market likely to return to normal thereafter.
