Australia's brief love affair with fixed rates now over

This as owner-occupier refinancing hits a new high

Australia's brief love affair with fixed rates now over


By Mina Martin

New borrowers have turned their backs on fixed rate home loans, recent ABS lending indicator data has suggested.

Amid fast fixed rate hikes by banks, the proportion of fixed loans funded for both new loans and refinancing in May was just 12%, in seasonally adjusted terms.

At its peak in July 2021, 46% of all new loans were fixed.

Sally Tindall, research director, said “Australia’s brief love affair with fixing is over, with the ultra-low COVID rates now long gone.”

“With the majority of big four bank fixed rates now starting with a ‘5’ or a ‘6,’ borrowers are returning to variable home loans,” Tindall said.

A moderate rise in the overall value of new home loans was recorded in May, which ABS attributed to backlog.

“The value of new home loans will likely drop as the property market cools, with the weekend’s clearance rates at just 55% across the combined capitals, according to CoreLogic,” Tindall said. “Many Australians who were looking to buy have now pressed pause, waiting for prices to drop further before jumping in.”

Meanwhile, the ABS data also showed a 2.3% rise in the number of owner-occupier first-home buyer loans month-on-month in May, but a nearly 32% decline in the numbers year-on-year, with 4,708 fewer first-home buyers in May 2022 than in May 2021.

“With 35,000 new places in the federal government’s First Home Guarantee scheme now open, we could see first-home buyer numbers increase,” Tindall said. “However, young Australians buying with wafer-thin deposits need to be aware of the risks and make sure they are prepared for their repayments to continue to climb as the RBA keeps hiking.”

The total value of refinancing increased by 3.1% in May, with owner-occupier refinancing hitting a record high.

“There has been a surge in borrowers refinancing their home loans, locking in a lower rate to combat the RBA rate hikes,” Tindall said. “While across the board variable rates are rising, many banks are offering sharper rates and big cashbacks for customers willing to refinance.”

While there was a slight lift in the national average of new loan size in May, it fell in five states – NSW, SA, WA, Tasmania, and the Northern Territory. In NSW, the average new mortgage size was down by $5,273 in May, but was still up $68,868 than the previous year.


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