Banks on notice as refinancing levels rise after interest rate hikes

MAJOR banks and lenders have been put on notice by wary homeowners, after latest figures showed a jump in refinancing following out-of-cycle rate hikes.

There has also been a jump in homeowners moving to mortgage rates that were fixed for two years or longer - a sign that many believe we have hit bottom on interest rate levels.

Latest Australian Bureau of Statistics housing finance figures, out today, showed a 3.5 per cent rise in refinancing in November said to be triggered by several major banks increasing mortgage rates the month before.

TD Securities chief Asia-Pacific Macro Strategist Annette Beacher said refinancing jumped 3.5 per cent in November and 15.6 per cent over the year.

October 14 to 23 “was the spate of out-of-cycle rate hikes by the major banks”, she said.

“The share of fixed mortgages (locked in for two years or more) jumped from 9.1 per cent to 11.4 per cent in November, also not a coincidence,” she said.

“Two years or longer is a more reliable sign of shifting consumer behavior, and clearly households are locking in good deals as they think the easing cycle is over... Overall, a decent report but shows that consumers did respond quickly to those out of cycle hikes!”

At the end of November, Aussies owed $1.449 trillion on their property, up $11B (0.8 per cent) from the October closing balance. The bulk (63 per cent) was made up of owner occupiers who owe $922B, while investors had $527B outstanding.

Home loans rose 1.8 per cent in November according to ABS, led by owner occupiers (up 2.4 per cent in November and 25.8 per cent over the year.

Investment lending also rose 0.7 per cent in November after taking a -6.1 per cent hit the month before - but Ms Beacher said overall the sector had been shrinking since April last year.

The data comes as Queensland regional building approvals hit “two speeds” - fast in South East Queensland and slow everywhere else in the state.

The Gold Coast was going gangbusters rising almost 51 per cent in the past 12 months, according to Master Builders Queensland, while Greater Brisbane approvals rose 33 per cent and the Sunshine Coast was up 32 per cent. Resource regions like Mackay and Whitsunday and the Central Queensland were in full slowdown mode - with approvals down -59 per cent and -51 per cent, respectively, according to MBQ manager policy and economics Dyan Johnson.

“Unit approvals have been largely responsible for pushing up the figures in SEQ. Generally, approvals for the past 12 months are still strong, with total approvals for Queensland up by 26 per cent (seasonally adjusted).”

Housing Industry Association economist Diwa Hopkins said total lending was on the rise but still below the peak of August last year.

“This is a positive update for Australia’s housing sector, showing that lending activity remained healthy toward the end of last year,” she said.

“These signals from housing finance are consistent with other indicators pointing to very healthy levels of activity in the residential construction sector in early 2016.”

November saw increases in new home lending to owner occupiers in New South Wales (9.7 per cent), Victoria (8.2), Queensland (2.3 per cent), South Australia (6.3 per cent), the Northern Territory (96.6 per cent) and the Australian Capital Territory (8.2 per cent). Western Australia (-15.9 per cent) and Tasmania (-10.7 per cent) were both down.

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