This article is from the Australian Property Journal archive
AUSTRALIANS are thinking smaller as interest rates rise, with borrowers taking out diminished loans when looking to build a home.
According to home loans market place Joust, loans taken with the purpose of building a home accessed through its platform have taken a nose dive in the year to July 2022, as interest rate hikes continue.
The average loan size for this purpose fell 28.05%, from $564,451 in July 2021 to $557,314 in July 2022.
“Record low interest rates meant that lenders were seeing interest not only from people looking to get into their first home, but others who could borrow to build their dream homes without having to worry much about the interest they would be paying back,” said Carl Hammerschmidt, CEO at Joust.
On the other hand, the average size of loans for refinancing has held comparatively stable, with a 1.26% fall for July 2022 compared to the same month last year, down from $564,451 to $557,314.
Loans to buy also saw a more marginal decline than for loans to build, with a 6.81% drop from $655,912 to $611,250.
“As our data shows, interest for bigger loans in those categories has dropped off significantly in the last 12 months. At the same time, the needle on average loan amounts for the purpose of refinancing has moved very little, and Aussies remain keen to get the best deal,” added Hammerschmidt.
Both Victoria and NSW saw the most significant declines in the build category, with respective declines of 39.13% or $975,000 down to $593,500 and 30.79% from $660,000 to $456,789.
While across all categories South Australia reported the biggest decline in average loan size over the year, dropping 32% or a change of $592,333 to $402,786.
Queensland saw a more mild average loan size drop across all three categories, falling by 6.02% from $469,511 to $441,258, with Victoria falling by 5.9% from $557,330 to $524,473.
The ACT however saw a 15.81% increase in average loan size over the year, climbing from $450,000 to $521,167.
And NSW, despite significant falls in the build category, reported a 13.8% increase in average loan size, from $728,216 to $828,693.
The increase, for NSW at least, was largely driven by a significant increase in average refinancing loans, where there was a 22.78% increase from July 2021 to 2022.
“We anticipate the average size of loan in this refinance category to grow in the final quarter of 2022 and into 2023 as many come to the end of their fixed interest rate periods on home loans,” concluded Hammerschmidt.
