- Victorian home loan lodgements fell 20% since January as rising interest rates reduce buyer borrowing power.
- Investor lodgements experienced the largest drop in Victoria, down 38% after four rate increases and tax adjustments.
- Refinancing hit a record 57% of total lodgements as families seek breathing room in household budgets.
With September marking the fourth Reserve Bank of Australia (RBA) rate hike this year, the property market is slowing down as buyers and sellers face growing uncertainty.
According to Loan Market’s October loan trends report, home loan lodgements (excluding refinancers) in Victoria have fallen 20% since January, before the rate-hiking cycle began – below the national average decline of 24%.
“As property prices fall and interest rates climb, buyers are naturally taking a more cautious approach,” Loan Market credit expert Shay Waraker said.
“Higher rates directly reduce how much buyers can borrow, so many are choosing to wait and see if prices drop further before taking the plunge.”
While activity has slowed across all buyer types, investors have pulled back the most.
On top of four rate increases, investors are feeling the squeeze from federal budget changes to capital gains tax and negative gearing. Since January, investor loan lodgements in Victoria have fallen 38% – below the national average drop of 44%.
Across Australia, investor lodgements for existing properties have dropped 56% since before the rate-hiking cycle began in late January. New property lodgements have also fallen, though by a smaller 10%.
In Victoria, first home buyer loan lodgements have dropped 16%, while lodgements for owner-occupier upgraders have fallen 15%.
At the same time, rising interest rates are motivating more homeowners to review their current loans and refinance.
“When rates rise, we consistently notice two trends: fewer new loan applications and a sharp increase in refinancing,” Ms Waraker said.
“Higher interest rates prompt mortgage holders to review their current loan – whether that means securing a lower rate p.a. or adjusting loan features to ease monthly repayments. It is a good idea to consider exploring options to find the right loan for your needs.”
“In this current climate, many homeowners are simply looking for some wriggle room in their household budgets.”
Off the back of this, refinancing reached a record high of 57% of all Loan Market Group lodgements during September, as brokers searched for a better deal for their customers in a rising rate environment.
