The Age: Two bits of interesting and relevant home loan info for owner-occupiers in Tarneit:
1. Only 9.6 per cent of new borrowers were taking out fixed interest rate loans, the lowest proportion in four years.
2. The average new loan for an owner-occupier in the state has increased nearly 20 per cent in the year to August to $378,100
3. Compared to a year ago, loans have jumped about $61,700!
4. Interest rates for investors are now up to 0.85 percentage points higher than for owner-occupiers
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Average Victorian home loan jumps $61,700 in a year
by Clancy Yeates
Source – The Age, published October 10, 2015
Home buyers are piling on debt, with new figures showing the average new mortgage is growing even faster than the turbocharged property market.
People in Victoria taking out a loan for a home to live in are, on average, borrowing $61,700 more than a year ago, thanks to surging house prices and record low interest rates.
The average new loan for an owner-occupier in the state has increased nearly 20 per cent in the year to August to $378,100, official figures showed on Friday.
This is faster than the 10.6 per cent lift in Melbourne home prices over the same period, and the strong growth suggests many buyers are responding to record low interest rates by borrowing more.
While regulators are having some success at reining in a boom in lending to property investors, the figures also suggested owner-occupiers were increasingly driving growth in the mortgage market.
It comes as regulators closely watch the housing market, after the International Monetary Fund last week said it believed house prices were overvalued by about 10 per cent nationally, and 16 per cent in Sydney
Across the country, the average new owner-occupied home loan was $371,200 in August, after growing by 15.4 per cent in the year, its fastest annual pace in 12 years, according to CommSec.
“Not only is the size of the average home loan holding at a record high, but it is growing at the fastest pace in 12 years,” CommSec economist Savanth Sebastian said.
It comes as momentum in the home loan market shifts towards owner-occupiers, after banks put the brakes on lending to investors in recent months.
The value of owner-occupied home loan approvals jumped 6.1 per cent in August, in contrast to a 0.4 per cent fall in the value of housing investor loans, the ABS said, though it cautioned the data was more volatile than usual.
“We’ve seen a pick-up in the owner-occupier market, especially upgraders, at the expense of investor finance,” ANZ economist David Cannington said.
Banks have sought to entice owner-occupiers with lower interest rates and cash-back offers in recent months, while investors have been hit with rate rises and tougher lending conditions.
Interest rates for investors are now up to 0.85 percentage points higher than for owner-occupiers, comparison website RateCity said.
This two-tier market has given borrowers an incentive to have their loan classified as an owner-occupied mortgage, clouding the official figures. The ABS cautioned that some of the figures contained “increased volatility” because of reactions to policy changes by banks.
BT economist Chris Caton said the figures suggested there was still “a good deal of heat” in the housing market, though some of the changes may be overstated in the statistics because banks had an incentive to classify new loans as owner-occupier rather than investor.
Since May, banks have instituted various measures to slow investor lending, including raising interest rates, tightening loan criteria and forcing new borrowers to stump up bigger deposits.
This is being done in response to the Australian Prudential Regulation Authority’s demand that housing investor loan growth slow to less than 10 per cent a year, from 10.7 per cent in August.
Mr Cannington said that in the three months to August, once refinancing was excluded, new loan approvals for owner-occupiers had increased by 22 per cent. Over the same period, new investor lending had fallen 0.4 per cent, he said.
“It’s showing that some of the changes that the lenders have made are having an impact on investor lending,” Mr Cannington said.
The ABS figures also showed many customers were betting interest rates would stay at record lows.
Only 9.6 per cent of new borrowers were taking out fixed interest rate loans, the lowest proportion in four years.
“If you’re taking out these larger loans, a prudent course might be to lock some of that in a fixed rate, but at the moment it seems like we are running a bit of a gauntlet,” Mr Sebastian said.