The current uncertainty in the global financial markets has prompted a record number of property owners to refinance their home loans according to the Australian Financial Group (AFG).

The AFG Mortgage Index showed almost two in five (38%) mortgages sold in May were used for refinancing purposes. This is a significant increase from the 36.6% it recorded the previous month.

The number of people upgrading their homes also dropped considerably to 15.4% from the 18% average before the rate hike started to bite.

The proportion of first homebuyers dwindled further to just 9.9% of the total mortgages sold in the same month.

On the bright side, investors continue to power ahead, taking 36.7% of all home loans sold by the mortgage broker.

“May was very much a month of two halves for us. We started the month with strong demand, particularly from investors, but the May rate rise, combined with all the other worrying economic news, really took all the heat out of the market,” said Mark Hewitt, General Manager of Sales and Operations for AFG.

Hewitt is concerned that last year’s period of growth won’t last. “After meeting with brokers from around the country the feeling is one of deepening concern. After a period of rebuilding confidence and return to normal market conditions last year, people are feeling quite uncertain about the state of the economy,” he said.

The record number of people refinancing their home loan indicates that homeowners are shopping around for better deals as a result of recent rate hikes according to Hewitt. Uncertainty about the future of interest rates is also causing a majority of borrowers to choose variable loans. According to AFG figures 76.7% opted for a variable loan in May, with only 2.9% choosing to lock in a fixed rate.