Australia’s mortgage downturn has deepened, with refinancing weakening as affordability pressures weigh on borrowing appetite.
Mortgage demand fell 19.2 per cent annually in September, while refinancing declined across both lender channels, according to credit reporting agency Equifax’s latest Consumer Market Pulse.
The sixth consecutive month of declining demand reversed August’s improvement to a 14.1 per cent annual fall, following July’s 16.4 per cent contraction.
Equifax chief solutions officer Kevin James said households were pulling back from additional borrowing amid persistent financial pressures.
“September data indicates that the underlying market contraction has resumed with greater intensity, dropping to -19.2 per cent YoY. Rather than taking on expanded debt commitments in a sustained high-rate environment, Australian households are taking a decisive step back,” James said.
Refinancing loses momentum
Refinancing with another lender fell 8.8 per cent annually, compared with August’s 0.8 per cent decline, while same-lender refinancing dropped 28 per cent.
Equifax pointed to repayment-capacity testing as a possible explanation for the deterioration in lender switching.
“Strict serviceability assessment buffers appear to be a likely cause,” Equifax said.
James said assessment requirements could prevent existing borrowers from securing more competitive rates elsewhere.
“In the current economic climate, strict regulatory serviceability assessments appear to be holding borrowers in place. Many existing mortgage holders wanting to shop around for a better rate are likely finding themselves unable to clear the serviceability needed, effectively locking them into their current arrangements,” he said.
Refinancing demand among 26- to 35-year-olds fell 14.2 per cent, contrasting with increases of 3.2 per cent among 56- to 60-year-olds and 2.3 per cent among those over 60.
First home buyers retreat
First home buyer applications fell 22.1 per cent annually, deepening from declines of 20.1 per cent in August and 19.2 per cent in July.
Equifax said the contrast with late last year’s surge was widening.
Average first home buyer mortgages remained near all-time highs at $743,000, including $634,000 among 18- to 25-year-olds and $736,000 among 26- to 35-year-olds.
James said prospective buyers faced overlapping financial hurdles, potentially increasing their reliance on outside assistance.
“Combined with strict serviceability testing, high interest rates, and broader cost-of-living inflation are eroding confidence. For many prospective entrants, bridging the deposit and repayment threshold is likely becoming increasingly difficult without institutional or familial support,” James said.
Across overall mortgage demand, the youngest cohorts recorded sharper falls than the national result: 25 per cent among 18- to 25-year-olds and 22.5 per cent among 26- to 35-year-olds.
Demand among potential investors, defined by Equifax as people with two or more mortgages, declined 18 per cent annually.
The geographical retreat was also broad, with NSW recording a 21.2 per cent decline, followed by the ACT at 21 per cent and Queensland at 19.2 per cent.
Victoria and South Australia each fell 17.9 per cent, while Western Australia declined 16.6 per cent.
[Related: Mortgage burden edges towards near 40-year high]
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