Lower interest rates are driving a rise in mortgage demand and refinancing activity.
Mortgage demand has continued to increase, fuelled by this year’s interest rate easing cycle and the start of the spring selling season, according to Equifax research.
The Equifax August Consumer Pulse Insights show that mortgage demand rose 10 per cent in August compared to the same month in 2024.
Mortgage demand was down 5.1 per cent last month compared to July; however, year-to-date demand up to September remains 5.2 per cent higher than the same period last year.
The central bank’s decision in August to bring rates to their lowest level since May 2023 helped lift demand for mortgages.
The market widely expects further rate cuts this year, with the central bank hinting in the minutes for the August meeting that further rate cuts over the coming year “appeared likely”, and that the current stance of monetary policy was still “somewhat restrictive”.
Lower interest rates have also boosted refinancing activity, as mortgage holders seek to benefit from the cheaper cost of borrowing.
Refinance inquiries made up almost 36 per cent of total mortgage demand during August, Equifax research found.
New mortgage originations inched 1.5 per cent lower year on year and down 2.3 per cent month on month. In August, new mortgages made up 31.7 per cent of all inquiries.
There was broader growth in consumer credit demand, particularly for unsecured credit, which jumped 19.9 per cent year on year, driven by consumer appetite for buy now, pay later (BNPL) (up 56.1 per cent year on year).
Commenting on the research, Equifax chief solution officer Kevin James said: “Spurred on by another interest rate cut, we saw mortgage demand increase 10 per cent year-on-year in August. This is despite reports that listings are lower than usual for this time of year, illustrating that buyers are in the market and actively looking to take advantage of lower rates.
“Looking ahead, we expect that repayment capacity will become a major consideration for lenders over the coming months, which could in turn have an impact on mortgage inquiries and approvals.”
Reflecting on housing affordability, James added: “As more stock comes onto the market during the Spring selling season and prospective home buyers are given a boost by the expansion of the Government’s First Home Buyer Guarantee scheme, we might see affordability become less of a barrier for a period.
“However, over time it’s likely that prices will continue to rise, and lenders will need to carefully consider the long-term repayment capability of consumers who enter the market with a lower deposit.”
The start date of the expanded Home Guarantee Scheme has been brought forward to 1 October, when all Australian first home buyers with a 5 per cent deposit can apply for the scheme, while property price caps will also be lifted.
Earlier this week, the RBA warned that the scheme would likely lead to rising house prices.
[Related: RBA hints at more rate cuts this year]
