Record number of Aussies refinancing as new home lending plummets

A record number of Australians are refinancing their homes with new figures showing a significant drop in home lending during the coronavirus crisis.

The Australian Bureau of Statistics revealed an 11.59 per cent drop in new home lending for May 2020, the biggest drop on record.

This resulted in a whopping $2.15 billion plunge in the market, however Australian Prime Minister Scott Morrison says there is no need to worry.

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"I think it would be premature to be making medium or even short-term forecasts about the Australian property market at the moment," Mr Morrison said.

"The thing about the Australian housing market is that demand has always outstripped supply, particularly in those markets which have been most heated.

"We've seen an undersupply of housing and oversupply of demand and that has always been what's driven the housing market."

Despite the drop in home lending numbers in May, the ABS revealed that refinancing has hit a record high, with external refinancing numbers hitting 29.19 per cent from April to May and 63.10 per cent, year-on-year according to seasonally adjusted figures.

"Refinancing went through the roof in May, as homeowners looked for quick ways to reduce expenses and get into a better financial position," Rate City's research director Sally Tindall said.

READ MORE: COVID-19 delays Sydney millennials from buying property for 14 months

She said while there could be a small rise in lending next month with the recent lift in lockdown restrictions, it will still be a long time before the home lending market recovers.

Mr Morrison said Australia's housing market is resilient and many people who have taken advantage of the opportunity to draw from their superannuation balances have used that money on their mortgages.

"It's improved resilience with their mortgage and in the housing market - that strikes me as a fairly common-sense thing to do," he said.

He also said yesterday's decision by banks to allow customers to rollover and defer debt payments was welcomed.

"That's one of the many changes that have been important to date and will be important later in the year," Mr Morrison said.