Over the past three years, Australia saw the greatest recorded increase in mortgage refinances on record.
Monthly mortgage refinances increased from around $10 billion in mid-2020 to a peak of $21 billion in mid-2023, according to the Australian Bureau of Statistics (ABS).
However, the mortgage refinancing boom looks to have finally run out of puff, with the total number of refinances falling heavily to $18.5 billion in September:
The boom in mortgage refinancings was driven by the large numbers of borrowers that were forced to renegotiate fixed-rate mortgages taken out when interest rates were at historical lows during the pandemic:
These borrowers have moved from ultra-low fixed-rate loans of around 2% to variable rates of between 6% and 7%, forcing many to seek a better deal with a different lender.
The fixed-rate mortgage ‘cliff’ has largely run its course, given most of the cheap pandemic fixed rates have expired:
This suggests that the volume of mortgage refinancing should continue to fall going forward.
That said, Australian households are now paying a record share of their incomes on debt repayments:
And this will only rise if the RBA continues to lift the official cash rate above its current level of 4.1%.
Therefore, I expect mortgage refinancing activity to remain higher than average next year, despite the end of the fixed rate cliff.
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