Inflation, interest rates: ABS reveals average mortgage size at record high

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New figures have revealed the size of the average Australian mortgage is now at a record high, with borrowers taking on bigger debts than ever before to secure their dream of home ownership.

Lending indicator data released on Friday by the Australian Bureau of Statistics revealed the national average new mortgage size as of December 2023 was $624,383, the highest level on record.

The loan size for each state and territory was up from November, the data showed, with state-based records surpassed in Queensland ($572,439), South Australia ($519, 478) and Western Australia ($509,275).

South Australia has seen an 11.2 per cent hike in mortgage size since the start of the Reserve Bank’s tightening cycle – which has seen 13 rate hikes since May 2022, while Victoria saw a 3.8 per cent decrease over the same period of time.

While NSW has seen a slight decline from its peak mortgage size of $803,235 – recorded in January 2022 – it still holds the largest average new mortgage size across Australia, at $785,405.

Sally Tindall, research director at ratecity.com.au, said it was concerning to see Aussies take on whopping debt while interest rates were so high.

“It’s incredible to think borrowers can afford these super-sized loans at a time when mortgage rates are largely sitting in the ‘6’s,” she said.

Ms Tindall said borrowers should think carefully about their own financial situation before taking on huge debt, instead of just listening to what their lender says they can afford.

“Financially, it’s often hardest to meet your repayments at the beginning of your loan, but if the cash rate starts to rise again in the years ahead and you haven’t made decent headway on your debt, you might find you can’t pay the mortgage on a house you’ve lived in for years,” she said.

While those who can afford it are taking out monster mortgages, the data showed one group were walking away, with new loan commitments for first home buyers falling sharply in the month of December, in the latest sign that more Australians are giving up on the dream of owning their own home as house prices continue to rise to new heights.

The total number of first homebuyer loan commitments hit 9491 Australia-wide in December, a sharp 8.4 per cent fall from November.

The value of first homebuyer loans also fell 5.5 per cent to hit $4.8bn.

Though December registered a sharp drop, 2023 in total registered 12.9 per cent growth in the number of first homebuyer loans.

Some states also bucked December’s gloomy figures for first homebuyers, with South Australia recording a 2.6 per cent uptick in the number of new loans.

Tasmania and the Northern Territory also recorded growth rates above five per cent.

But loans collapsed in Queensland, with the Sunshine State recording a substantial 14.1 per cent decline.

Victoria and NSW both recorded 3.7 per cent falls.

Master Builders Australia CEO Denita Wawn said the December decline meant first home buyers now accounted for less than one third of housing loans.

“During 2023, first home buyers struggled against the backdrop of larger than expected interest rate increases as well as resurgent house price growth,” she said.

“Strong rental price growth has also eaten into their financial capacity and slowed down the process of saving for a home purchase deposit.”

The total value of new loan commitments fell 4.1 per cent in the month, with owner-occupier loans falling 5.6 per cent and investors sliding 1.3 per cent.

Ms Wawn said December’s figures revealed the “demand side” of the market was beginning to struggle.

“Poor sentiment among owner occupiers resulted in the number of loans for newly built homes declining by 4.9 per cent while existing home loans suffered an 8.2 per cent reduction,” she said on Friday.

“The figures for December highlight the fact that the demand side of the new home building market is struggling at the same time as obstacles on the supply side persist.

“The pipeline for new homes is shrinking and not showing assurances that people are able to build new homes.”

‘Perfect storm of headwinds’: Australia faces housing construction pressure

The peak body CEO noted input costs in the building sector continued to strain supply.

“Having stabilised during the September 2023 quarter, there were hopes that building materials costs might have fallen during the December 2023 quarter,” the organisation stated.

“The 0.3 per cent increase which occurred during the last three months of 2023 is an unwelcome result and means that building materials are over one third more expensive (33.5 per cent) than before the pandemic.

“Combined with continued labour supply pressures, the resumption of building materials price rises is likely to frustrate efforts to expand the stock of new homes.”

House prices continue to rise across much of Australia in early 2024, with data from CoreLogic showing a 0.4 per cent rise in January.

The median price of a home in Australia now sits at $759,000.

Master Builders said December’s “weak” set of lending figures added to the case for an RBA interest rate cut “as soon as possible.”

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