The recent interest rate increases and threat of further rate hikes are taking a toll on homeowners, as shown by the massive jump in refinancing commitments. The number of loans for refinancing purposes surged by 10.6% in November - the biggest increase in six-and-a-half years according to recent data from the Australian Bureau of Statistics (ABS).
Craig James, chief economist with CommSec, said the most recent rate hike in November prompted more borrowers to either shift loans to another lender or seek better terms. "The upsurge in refinancing activity is a very positive development, indicating that people are keen to get their financial houses in order so that their lifestyles aren't adversely affected by rising interest rates," James said. "Borrowers aren't sitting around; they're actively refinancing loans to ensure that rising interest rates don't cramp their lifestyles."
The number of new housing loans was also very strong, rising by 4% in the same month. Tasmania recorded the highest rate of growth of almost 10%, followed by Victoria with a 4.7% increase.
The ABS data also showed a significant increase in the proportion of borrowers taking out fixed rate loans - jumping to an eight-year high of 24% from 21% in October.
"Home loan borrowers clearly have had enough of rising interest rates, with one in four opting in November for fixed term rather than variable rate loans," James said.
However, falling affordability continues to haunt first homebuyers, with the proportion of first-time buyers dropping from 18.7% to 18.3% in November. Potential homebuyers cancelled $1.9bn worth of previously committed loans in November - a whopping 19.7% compared to a year ago.