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Real Estate SecretsAustralian home loan borrowing has reached unprecedented levels, setting records nationwide, with a notable exception in Victoria. The average new loan size for owner-occupiers in Australia has surged to a historic high, surpassing previous figures by a substantial margin. The Reserve Bank of Australia (RBA) has maintained interest rates at a 13-year high of 4.35%, but the prospect of a rate cut looms amidst easing inflation.
Data from the Australian Bureau of Statistics (ABS) reveals that the average loan amount in the December quarter soared to $666,000, marking a significant increase from a decade ago. This surge in borrowing activity coincides with a 1.1% quarterly growth in house prices across major cities and a 3.8% increase in regional areas, as reported by Domain.
Across the states and territories, Western Australia witnessed a notable spike in new owner-occupier mortgages, with an average loan amount of $599,000. In contrast, New South Wales residents borrowed a staggering $811,000 on average, while Queensland, South Australia, and the Australian Capital Territory also reported substantial loan sizes. Tasmania and the Northern Territory recorded relatively lower average loan amounts compared to the national average.
Victoria stood out as the only state where the average loan size did not hit a new record high. This deviation is attributed to declining property prices in the state and broader economic factors impacting Victoria. Despite this, the average mortgage in Victoria remained substantial at $632,000, positioning it as the fourth most expensive state for home loans behind NSW, the ACT, and Queensland.
The continuous escalation in loan sizes is primarily fueled by soaring property prices, defying the series of interest rate hikes by the RBA. Additionally, the trend towards smaller deposits necessitates borrowers to seek larger loan amounts, contributing to the upward trajectory in borrowing figures.
Investor activity in the housing market experienced a slight decline in the December quarter, marking the first decrease since 2023. However, the total value of new investment loans in 2024 outpaced the previous year, indicating sustained investor interest despite the temporary downturn.
For first-home buyers, the landscape remains challenging, with modest increases in new loans recorded in the December quarter. The pressure on first-time buyers persists, highlighting the competitive nature of the property market. Nevertheless, the recent market adjustments offer a window of opportunity for first-home buyers to navigate into the property market with reduced competition from investors.
As the RBA contemplates rate cuts, the future borrowing landscape remains uncertain. While rate cuts may stimulate market activity, experts suggest that borrowers might seize the opportunity to secure larger loans amid improved market sentiment. The interplay between interest rates, borrowing capacity, and market dynamics will shape the trajectory of home loan borrowing in the coming months.
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