This article is from the Australian Property Journal archive
AUSTRALIAN borrowers are signing up for bigger home loans than ever, as the average new owner-occupier mortgage reached a new record high over May.
According to the latest ABS lending data, May saw the average new owner occupier mortgage rise 0.04% to $626,055, which is a 2.4% increase since the RBA begin its rate hiking cycle in 2022.
“Higher house prices have seen the average loan in May blow out over the year by over $41,000, up 7.1% but still lagging CoreLogic’s reported median house price rise of 8.3 percent,” said Steve Mickenbecker, finance expert at Canstar.
“With the number of new loans well above last year, it looks like borrowers aren’t exiting the market but are compromising a little on the house they’re buying.”
The average new owner-occupier mortgage reached a new record highs in Queensland at $586,627, South Australia at $541,775 and Western Australia at $538,860. While Tasmania was up 2.9% to $462,324.
Victoria was the only state to record a decline over the month, down 1.0% to $601,891 and down 5.6% since April 2022. This is well below the peak recorded in January 2022 at $651,364.
NSW was also down since the RBA’s rate hikes began, falling 2.3% to $767,584. Though this is still up 0.4% for the month of May.
“Australia’s Teflon property market continues to rise, dragging the average new loan size along for the ride, despite the rate hikes,” said Sally Tindall, research director at RateCity.com.au.
“Over the last two years, buyers have seen their maximum borrowing capacity plummet, in some cases by hundreds of thousands of dollars, as a result of the RBA hikes, and yet the average new loan size has hit a new record high,” she said.
“It’s astounding to think owner-occupiers are, on average, taking out larger loans than ever before despite the fact the cash rate is sitting at a 12-year high.”
First home buyers are taking out fewer loans, falling 3.3% over May and up by just 3.7% over the year to 9,873 loans.
Meanwhile, the value of new home loans fell by $503 million or 1.7% to $28.80 billion over May.
With owner-occupier loans falling $366 million or 2.0% to $18.13 billion and investor loans falling $137 million or 1.3% to $10.67 billion.
Refinancing saw a minor decline over May, down 0.7% or $113 million with $16.18 billion worth of mortgages refinanced over the month.
“The stalling of refinance makes no sense when the average borrower’s rate is a full 0.60 percent above the 5.80 percent lowest variable rate on Canstar for a 20 percent deposit loan. On a $600,000 loan over 30 years that potential saving is $241 a month,” added Mickebecker.
“Unfortunately, there are borrowers who are too financially stressed to qualify for refinance, but there are also others who may have renegotiated with their bank a while back and ticked the job as done, when there are further savings to be had.”
The value of refinancing has remained at just above $16 billion since the beginning of 2024.
“The bifurcation of the property markets continues to play out. Perth is running hot, while at the other end of the spectrum is a languishing Melbourne market,” said Maree Kilroy, senior economist at Oxford Economics Australia.
“At the national level, we expect price momentum to temporarily fade in the back half of 2024. Interest rate cuts from early 2025, compounded by a sustained housing shortage, are set to trigger an acceleration in price growth thereafter. However, housing affordability will place a limit of on gains.”
