Refinancing activity surged in Queensland, New South Wales, Victoria, and Western Australia over the September 2022 quarter, driven by borrowers seeking for a more competitive mortgage product amid rate rises.

PEXA Refinance Index recorded its highest level, rising sharply since April to reach 179.6 points over the week ending 18 September.

Overall, a record of 102,669 property refinances were recorded in the four monitored states, with Victoria taking up the biggest volume at 36,982, followed by New South Wales (34,084), Queensland (21,026), and Western Australia 10,577.

PEXA head of research Mike Gill said borrowers are responding to the rate hikes by refinancing.

“We continue to see heightened refinancing activity across the nation as Australians respond to rising interest rates by looking to reduce arguably their greatest expense, their monthly mortgage repayment,” he said

According to PEXA, non-major banks continued to be the top option for many refinancing customers, particularly in Queensland where major banks lost more than 1,000 refinancers.

Interestingly, major banks dominated new residential loans, particularly in both Victoria and New South Wales.

In Queensland, however, non-major banks still reigned supreme even in new loans.

Overall, only 119,117 new loans were completed during the quarter, which represent a 12% drop from the previous quarter.

“The record levels of new loans seen throughout 2021 and early 2022 have slowed in the recent quarter, coinciding with a dip in property sale settlement volumes,” said Mr Gill.

“We have also seen a small drop in average loan-to-value ratios across Victoria and New South Wales over the past 12 months, with lenders tightening credit as interest rates rise, and this will ultimately impact the borrowing capacity for some home buyers.”

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