Mortgage Activity

While the value of new loans dipped this month, refinancing has skyrocketed to an all-time high in June.

Latest figures from the ABS show the total value of refinanced loans hit $16.24 billion in June, up $1.37 billion in just one month, in seasonally adjusted terms.

That $16.24 billion figure is made up of a record&nbsp;$10.84 billion&nbsp;from owner occupier&#39;s refinancing, up 112% on a year ago, and&nbsp;$5.41 billion from investors, up 67% year on year.

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Refinancing has risen sharply in recent months, fuelled by record low rates. COVID has also prompted many families overhaul their finances.

In the past 12 months, $151.12 billion worth of mortgages have been refinanced, in seasonally adjusted terms.

RateCity.com.au research director, Sally Tindall, said the record high in refinancing in June suggested mortgage holders were racing to lock in low rates in case they rise.

&ldquo;At the start of COVID, we saw a spike in refinancing as people rushed to lock in a competitive rate. COVID was a wake-up call for people to get their finances in order, and banks were at the ready, handing out some of the lowest rates in history,&rdquo; she said.

&ldquo;Over a year later and we&rsquo;ve now hit a new record high, although this time, the surge is more likely to be fuelled by a fear of missing out.&quot;

&ldquo;In the last five months, dozens of lenders, including the big four banks, have hiked many of their longer-term fixed rates. Taking these record-low fixed rates off the table has been the push some people needed to refinance,&quot; she added.

The latest figures from the ABS show the total value of refinanced loans hit $16.24 billion in June, a new record high

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Mortgage refinancing is hitting record highs: RateCity

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Mortgage activity is up 10 per cent on this time last year, according to CoreLogic's new Early Market Indicators report.
Through to the week ending June 28, activity was up 10.33 per cent on the same time in 2019.
To enlarge, <a href="https://www.propertyobserver.com.au/images/2020/6/30/Mortgage%20activity.jpg" target="_blank">click here</a>.
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Unsurprisingly the uptick in mortgage activity has been driven by mortgage holders refinancing given record low interest rates.
Mortgage holders refinancing are up 33 per cent over the same week last year. Refinancing made up 68 per cent of new mortgages written week ending June 28.
To enlarge, <a href="https://www.propertyobserver.com.au/images/2020/6/30/Loan%20Purpose.jpg" target="_blank">click here</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/30/Loan%20Purpose.jpg" alt=""> 
New mortgages written are up 11 per cent over the same week in 2019. 
 
 
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Mortgage activity up 10 per cent, driven by refinancing: CoreLogic

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Mortgage holders are continuing to refinance their home loans as banks fight for market share as interest rates continue to hold at record lows.
There's no suggestion from the RBA that rates will change until at least 2022 as the central bank attempt to drive the economy.
And as fixed rate mortgages expire, more and more mortgage holders are likely to refinance.
<img src="https://www.urban.com.au/images/2020/9/14/Refinancing.png" alt="">
According to CoreLogic's early market indicators, refinancing mortgages have rose 1.4 per cent.
That takes refinancing up over 23 per cent year on year.
Mortgages for new purchases dropped slightly over the last week, down -01.8 per cent, but are still over 25 per cent up year on year.
And CoreLogic has seen a -42 per cent decline over the week in MIP reports, which is reports for a mortgagee in possession valuation..
<h1>Newly Advertised Properties</h1>
Newly advertised properties were up 2.41 per cent over the week, according to CoreLogic's database.
New listings however are still -5.6 per cent down over the month.
Rental listings are up 5.2 per cent, again still down over the month.
<img src="https://www.urban.com.au/images/2020/9/14/Newly%20advertised%20property.png" alt="">
<h1>Pre-listing Activity</h1>
There's been a small rise in pre-listing activity, which CoreLogic define as more comparative market analysis reports being generated through their platform.
This report is essentially an indicator of new listings on the horizon.
<img src="https://www.urban.com.au/images/2020/9/14/pre-listing%20activity.png" alt="">
 
 
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Refinancing mortgages continue to rise as new listings also up: CoreLogic's weekly snapshot

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Mortgage market activity has decreased, according to CoreLogic, especially in Queensland and WA.
<a href="/images/2016/09/26/Screen%20Shot%202016-09-26%20at%2011.42.52%20AM.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/26/Screen%20Shot%202016-09-26%20at%2011.42.52%20AM.jpg" alt="">
 
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Mortgage market activity decreases: CoreLogic

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Darwin has the highest median time on market out of all capital cities, according to CoreLogic’s latest weekly report.
On average, a house at Darwin can expect to be on the market for 104 days, while units take 113 days to sell.
The average vendor discount in the city is the highest, with an 8% discount for homes and a 9% discount for units.
<a href="/images/2016/10/31/Capital%20city%20median%20time.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/31/Capital%20city%20median%20time.jpg" alt="">
This is in contrast to Sydney, where the average home will sell after being on the market for 28 days, while units will sell after only 27 days.
Similarly, the average vendor discount in the harbour city is low – 4% for both a home and a unit.
Western Australia has the highest month on month change for mortgage activity with a recorded 4% increase to 101.2 on the index value.
However, this still represents a decline in the month on month trend line by more than 4%, as the city's market attempts to recover form a post mining boom slump.
<a href="/images/2016/10/31/Mortgage%20market%20activity.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/31/Mortgage%20market%20activity.jpg" alt="">
Tasmania had the highest decline for month on month (4%), resulting in an index value of 84.8.
South Australia has seen the highest growth in listing market activity with an increase of 6% month to month with a seasonal change increase of 1%.
<a href="/images/2016/10/31/Listing%20market%20activity.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/31/Listing%20market%20activity.jpg" alt="">
Overall, the listing market activity for all capital cities have declined by 1% despite a seasonal increase of 1% to balance it out.
The biggest decline was in Tasmania, where the month to month change declined by 9%.
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Darwin's median time on market exceeds 100 days for houses and units: CoreLogic

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Both Queensland and Victoria has the highest month on month change for mortgage market activity, according to CoreLogic’s latest weekly report.
The property data firm says that both Queensland and Victoria’s mortgage market activity has increased by 6 percent.
<a href="/images/2016/12/05/Mortgage%20market%20activity.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/12/05/Mortgage%20market%20activity.jpg" alt="">
This is compared to New South Wales with the lowest increase of only 1 percent.
On a month to month trend basis, however, Tasmania has the highest increase of 5 percent.
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Queensland and Victoria's mortgage market activity increases by 6 percent

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Mortgage brokers settled 59 per cent of residential home loans in the 2018 September quarter, which was up from 53 per cent in the same quarter of 2017.
The escalating credit crunch implemented by the big banks in the wake of the banking royal commission triggered the largest year-on-year increase for any quarter over the last four years. 
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The data from CoreLogic also revealed that settled broker volumes slipped between the September 2017 and September 2018 quarters from $51.77 billion to $50.19 billion, a three per cent fall.
Mortgage brokers provide their potential clients access to a panel of 34 lenders on average.
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The new statistics reporting a sharp rise in broker market share came from the research group Comparator, a CoreLogic business.
Deloitte Access Economics issued a report last July which said the industry employed an estimated 22,215 people, which included 14,230 active brokers and 7,985 support staff.
Mortgage brokers, on average, have 13.8 years of experience in the industry.
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Australian mortgage brokers are settling 59 per cent of residential home loans

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EXPERT OBSERVATION
Demand for fixed rate home loans was stable in October, reveals data from Mortgage Choice.
According to the Company’s home loan approval data, demand for fixed rate home loans has stalled, accounting for 14% of all home loans written throughout the month of October, the same proportion as the month prior.
Our home loan data reveals that despite extremely competitive fixed-rate pricing, borrowers are reluctant to lock in a fixed rate. The level of demand for fixed rate home loans has not changed in four months and is significantly lower year on year. In fact, fixed rate loans accounted for a quarter of all home loan demand in October 2018.
In the current low-rate environment, we are seeing interest rates on fixed-rate home loans fall below 3% p.a., which makes it even more surprising to see fixed rate demand hover at levels not seen in eight years.
That being said, speculation is rife that the Reserve Bank of Australia will cut the cash rate a fourth time this cutting cycle, which would be reason enough to keep borrowers from locking in.
Demand for fixed rate loan products varied across the country. Borrowers in Victoria were the least likely to fix, with only 7% of borrowers locking in their rate, followed by Western Australia where 8% locked into a fixed rate product.
Meanwhile, borrowers in New South Wales were the most likely to choose a fixed interest rate home loan, with 18% choosing this loan, followed by borrowers in South Australia, where 17% chose to fix.
I suspect fixed rate demand is likely to remain at the same levels into the new year.
With such low interest rates on offer, now could be a great time to lock into a fixed rate home loan or make the decision to fix part of your home loan so can enjoy the best of both worlds. Ultimately, the answer to the fixed versus variable debate will come down to each borrower’s unique financial situation, needs and long-term goals.
My advice to borrowers who foresee a change to their income or face the possibility of budget constraints would be to speak to their mortgage broker. If you seek the comfort of knowing that you will have home loan repayment certainty, a fixed rate loan might be the right option for you.
That being said, if you want to take advantage of rate drops, a variable rate home loan might be a more suitable choice. We have seen variable rate home loan interest rates fall significantly off the back of three cash rate cuts from the Reserve Bank of Australia. If the RBA cuts the cash rate again, we could see variable rates drop even further.
Borrowers who are deciding whether to opt for a home loan with a variable, or a fixed interest rate would be well advised to speak to their local mortgage broker to discuss their options.
SUSAN MITCHELL is the Mortgage Choice Chief Executive Officer
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Fixed rate home loans remain unpopular: Mortgage Choice's Susan Mitchell 

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EXPERT OBSERVER
The latest ABS data on new housing credit showed a sharp rise in the value of home loan commitments, driven by a surge in owner occupier lending as well as a smaller rise in investment lending.
The rise in the value of owner occupier housing finance commitments over the September quarter (+12.1%) was the fastest quarter-on-quarter gain since the September quarter of 2015 (13.7%), taking the value of new owner occupier home loan commitments 17.3% higher since bottoming out in May earlier this year.
Growth in investment lending hasn’t been quite as strong, however the value of investment loan commitments was up 6.0% over the September quarter, which was the fastest gain since the December quarter of 2016.
The value of investment loan commitments is now 8.4% higher than the May 2019 trough.
With owner occupier credit outpacing investment credit, investors now comprise the lowest portion of housing loan commitments since the ABS records commence in 2003, currently tracking at 24.8% of the value of new mortgage commitments.
In contrast, shortly after the first round of macro-prudential rules were introduced in December 2014, investors comprised 43% of national mortgage demand. The trends in housing credit are similar across the states, with the value of owner occupier loan commitments generally outpacing investors.
Click <a href="https://www.propertyobserver.com.au/images/2019/11/14/Mortgage%20volumes%201.JPG" target="_blank">here</a> to enlarge.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%201.JPG" alt="">
New South Wales The value of owner occupier loan commitments was up 12.3% over the September quarter, compared with a 3.3% rise in investment.
Although investment credit growth is slower, NSW has the largest concentration of investment activity across the states, with investors comprising 30.5% of mortgage demand based on value.
First home buyers have surged higher over the past couple of years, as stamp duty exemptions and lower housing values have encouraged first timers back into the market.
First home buyers have comprised more than 25% of owner occupier mortgage demand since March this year, more than double the proportion of first home buyers prior to the market peak.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%202.JPG" alt="">
Victoria The value of owner occupier home loan commitments was 11.3% higher over the September quarter, compared with a 10.6% lift in investment lending.
Non-first home buyers drove the quarterly gains, with the value of loans up 13.4%, compared with a 9.2% rise in first home buyer lending.
The value of investor loan commitments remains almost 9% below the level a year ago, however Victoria is showing the second largest concentration of investors (after NSW), comprising 25.2% of mortgage demand in September.
First home buyers have been holding above 30% of owner occupier mortgage demand since February this year.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%203.JPG" alt="">
Queensland Investors are driving the largest increases in the value of mortgage activity, with the value of investor loans up 12.5% over the September quarter, compared with a 8.4% lift in owner occupier lending.
Despite the larger rise in investment lending, investors comprise only 17.9% of mortgage demand across Queensland, the second lowest proportion across the states (after WA).
First home buyers showed a larger lift in the value of lending over the quarter, up 11.1% compared with a 8.4% increase in the value of non-first home buyer loans.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%204.JPG" alt="">
South Australia Non-first home buyers are driving mortgage demand across South Australia, with the value of mortgage commitments up 10.8% over the September quarter, compared with a relatively flat 0.8% lift in first home buyer lending and a 1.3% increase in investment lending.
First home buyers have seen a stronger result over the past year, with the value of loans up 9.4%.
The September data showed investors comprised 21.9% of mortgage demand, which was well below the decade average of 29.9%.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%205.JPG" alt="">
Western Australia Mortgage activity is finally showing an upwards trend across Western Australia, with the value of owner occupier lending up 15.8% over the September quarter, while the value of investor loans surged 24.1% higher.
The quarterly result was the strongest gain for owner occupier lending since 2009 and the surge in the value of investment loans was the highest since 2005.
Mortgage lending is rising from a very low base, especially across the investor segment, after a prolonged period of weak credit growth.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%206.JPG" alt="">
 Tasmania Mortgage lending was positive on an annual basis across each of the broad market segments, driven by a surge in investment lending over the quarter (+32.4%) and a less substantial 26.2% lift in the value of owner occupier loans.
Tasmania was the only state to record an annual lift in the value of mortgage commitments across each of the broad market segments.
 
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%207.JPG" alt="">
Northern Territory The value of mortgages was down over the quarter and over the year across each of the broad market segments.
Over the past year, investor mortgage commitments were down the most (-30.5%), with a large fall across the first home buyer segment as well (-29.7%).
With housing values around 31% below their peak across the NT, first home buyers are taking advantage of very healthy levels of housing affordability, showing the highest concentration of any State or Territory across the NT, comprising 38.2% of owner occupier demand based on the value of new commitments.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%208.JPG" alt="">
Australian Capital Territory The value of owner occupier mortgage commitments was up 20.7% over the September quarter, driven by a surge in first home buyer activity where the value of lending jumped 75% higher.
The value of mortgage lending across the larger non-first home buyer sector of the market was up 10.3% and investment lending was 9.5% higher over the quarter.
The rebound in new housing credit flows is running in parallel with increased buyer activity and rising residential property values.
<img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%209.JPG" alt="">
According to CoreLogic’s Home Value Index, national dwelling values bottomed out in June this year, the same month that housing credit started to rise.
The improved credit flows have been supported by APRA’s decision to relax borrower serviceability rules, as well as the lowest mortgage rates since at least the 1950’s.
The flow of new credit is likely to be a key factor monitored by policy makers.
Any sign of a material rise in speculative buying activity, higher household debt or a slip in lending standards could be met by another round of macroprudential credit tightening, however at the moment, despite the recent surge in housing credit, investors remains underrepresented in the market and overall credit growth (based on the RBA credit aggregates) remains subdued, implying a strong focus on debt reduction from households.
The next round of APRA statistics providing an insight into key metrics covering riskier areas of lending such as the proportion of interest only loans and the proportion of high LVR lending is due out next month.
These statistics should provide some further guidance around any regulatory response that could impact on housing credit activity.
TIM LAWLESS is the CoreLogic head of research.
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