Interest rate cuts driving refinancing boom

According to the latest PEXA property and mortgage insights report, refinance volumes spiked by 12.5% in March, when compared to figures the previous year - a finding attributed to increased borrowing capacity and lenders’ incentives for home buyers in response to the Reserve Bank’s cash rate cut in February.

In property, Australia’s five mainland states saw a total of 156,573 settlements with a total value of $158.5b in the quarter, an increase of 1.2% in volume and a 5.3% increase in value from the same quarter last year.

Of this, $140.7b was spent on residential property, a 6.4% increase on prior year.

When compared to five years ago, this amount represents a 56.1% increase in residential property settlements since March 2020.

Demand for property in Queensland, Western Australia, and South Australia continued to remain strong.

Queensland recorded the highest number of settlements (43,530) but Victoria and SA recorded the highest growth in residential property sales – up 4.1% and 4.3% respectively from the same period last year.

NSW and WA lagged behind the other states, both growing by less than 1%.

However, QLD, WA and SA recorded 12-15% growth in the aggregate value spent on property compared to the same quarter last year.

Residential property prices continued to climb in the quarter, particularly in QLD, where median residential house prices have surged far beyond prices in its eastern counterparts.

In Greater Brisbane, prices increased by 12.3% on year prior and by 13.6% in regional QLD.

In terms of top suburbs for residential settlements, in NSW, there was a mix of outer growth suburbs on the greater Sydney fringe, inner-city suburbs and regional towns Port Macquarie, Dubbo and Orange.

In VIC, the list includes growth suburbs in Melbourne’s west, north and south-east; in QLD the Gold Coast and Sunshine Coast; while in WA, greater Perth is booming.

In mortgage trends, the number of home loans issued increased by 4.4% to a total of 118,320 and a total value of $80.2b. Of these, $73.5b were for residential property which represents an increase of 8.2% on the March quarter in the prior year.

Significantly, refinancing activity which had slowed in 2024, strongly picked up again the March quarter, with 91,786 refinances settled – an increase of 12.5% from the prior year.

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PEXA Group chief economist Julie Toth said the reports show that the Reserve Bank’s February decision to cut official cash rates was already demonstrating a tangible impact on the Australian mortgage market.

“Growth in refinancing activity has been driven by the recent interest rate cut, which has increased borrowing capacity for prospective buyers, and resulted in lenders introducing incentives such as reduced fixed -rate loans and cash incentives for homebuyers,” she said.

“We are continuing to see house price growth across the mainland states, and increasing demand for property in QLD, WA and SA.

"This cements a trend of buyer interest shifting away from NSW and VIC to the smaller capital cities, and the South-East QLD region in general.

“This increased popularity in QLD is also coming at a cost for first home buyers with median house prices increasing and the proportion of properties selling under $800,000 now in sharp decline.”