New figures have revealed that the size of the average Australian mortgage has now reached a record high, with borrowers taking on more debt than ever before to secure their dream of home ownership.
Credit indicator data released by the Australian Bureau of Statistics on Friday showed the national average size of new mortgages as of December 2023 was $624,383, the highest level ever.
The data showed loan sizes for every state and territory increased from November, surpassing state records in Queensland ($572,439), South Australia ($519,478) and Western Australia ($509,275).
In South Australia, mortgage volumes have risen 11.2 per cent 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 decline in the same period.
While NSW has seen a slight decline from its peak mortgage size of $803,235 – recorded in January 2022 – it still has the largest average new mortgage size across Australia at $785,405.
Credit indicator data released by the Australian Bureau of Statistics on Friday shows the national average size of new mortgages as of December 2023 was $624,383, the highest level on record
Sally Tindall, research director at ratecity.com.au, said it was worrying to see Australians taking on huge debts when interest rates were so high.
“It’s incredible to think that borrowers can afford these super-sized loans at a time when mortgage rates are largely in the 60s,” she said.
Ms Tindall said borrowers should think carefully about their own financial situation before taking on huge debt, rather than just listening to what their lender says they can afford.
‘Financially, meeting your repayments at the start of your loan is often the hardest, but if cash rates start to rise again in the coming years and you haven’t made decent progress on your debts, you may find yourself unable to can pay. the mortgage on a house you’ve lived in for years,” she said.
As those who can afford it take out massive mortgages, data shows one group is 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 their dream. of owning your own home, while home prices continue to soar to new heights.
“It’s incredible to think that borrowers can afford these super-sized loans at a time when mortgage rates are largely in the ‘6s,” said Sally Tindall, research director at ratecity.com.au.
The total number of loans committed to first home buyers reached 9491 across Australia in December, a sharp decline of 8.4 per cent from November.
The value of loans to first home buyers also fell by 5.5 percent to $4.8 billion.
Although December recorded a sharp decline, 2023 overall recorded a 12.9 percent growth in first-home buyer lending.
Some states have also surpassed December’s dismal figures for first home buyers, with South Australia recording a 2.6 per cent increase in new loans.
Tasmania and the Northern Territory also recorded growth rates of more than five percent.
But in Queensland, lending collapsed, with the Sunshine State recording a substantial drop of 14.1 per cent.
Victoria and NSW both recorded a decline of 3.7 per cent.
Master Builders Australia CEO Denita Wawn said the decline in December meant first home buyers now accounted for less than a third of home loans.
“In 2023, first home buyers struggled against the backdrop of larger-than-expected interest rate rises and resurgent house price growth,” she says.
‘The strong rental price growth has also affected their financial capacity and slowed down the process of saving for a down payment for the purchase of a home.’
The total value of new loan obligations fell 4.1 percent this month, with owner-occupier loans down 5.6 percent and investor loans down 1.3 percent.
Ms Wawn said December figures showed the ‘demand side’ of the market was starting to struggle.
“Poor sentiment among owner-occupiers has resulted in new home loans falling by 4.9 percent, while existing home loans fell by 8.2 percent,” she said on Friday.
‘The figures for December highlight the fact that the demand side of the new build market is struggling, while at the same time supply side obstacles remain.
‘The pipeline for new homes is shrinking and does not provide certainty that people can build new homes.’
Master Builders Australia CEO Denita Wawn said the December decline in loans to first home buyers meant this category of mortgage holders now accounted for less than a third of home loans.
The Peak Body CEO noted that input costs in the construction sector continued to put pressure on supply.
“After stabilizing in the September 2023 quarter, there was hope that construction material costs could decline in the December 2023 quarter,” it said.
‘The increase of 0.3 percent in the last three months of 2023 is an undesirable result and means that building materials are more than a third more expensive (33.5 percent) than before the pandemic.
“Combined with continued pressure on labor supply, the resumption of price increases for building materials is likely to frustrate efforts to expand the supply of new housing.”
House prices will continue to rise across much of Australia in early 2024, with data from CoreLogic showing a 0.4 per cent increase in January.
The average price of a house in Australia is now $759,000.
Master Builders said December’s ‘weak’ set of lending figures called for a RBA rate cut ‘as soon as possible’.