Value of new home loans has climbed 70% since 2020

By Jon Bragg

November 22 2021
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Equifax has flagged a significant increase in the value of new mortgages since the beginning of last year.

New data released by Equifax has shown that the value of new mortgages in Australia surged 70 per cent between January 2020 and July 2021.

Over the 18-month period, total mortgage limits were found to have increased by $110 billion or 5.6 per cent and average individual mortgage debt moved up 2.7 per cent for an average rise of $13,100.

Equifax reported that there were about 190,000 first home buyers that accounted for 23 per cent of newly opened applications during the period.

“It’s good to see that first home buyer growth has accelerated with encouragement from government stimulus packages,” said Equifax general manager advisory and solutions Kevin James.

“Still, it is worrying that mortgage limits are growing at a rate faster than most home owners’ ability to service their loans.”

Existing home owners who refinanced their loans (35 per cent), upgraded their property (26 per cent) or took out additional financing (16 per cent) accounted for the remainder of newly opened applications.

According to Equifax, first home buyer mortgage limits had climbed higher on the east coast in comparison to the rest of the country.

Loans increased by 12 per cent in Greater Sydney and 14 per cent in the rest of the state, while an increase of 10 per cent was recorded in Greater Melbourne and 9 per cent in outer Victoria.

In Queensland, mortgage sizes grew by 13 per cent in Greater Brisbane and 10 per cent across the rest of the state.

Meanwhile, only single-digit growth was recorded in Western Australia, with a rise of 6 per cent in Greater Perth and 7 per cent in regional areas.

“The size of first home buyer grants are similar across the board; however, disparities in the cost of living and the housing market opportunities in each state continue to be key contributing factors that are pricing mortgage borrowers out of the market, particularly in NSW and Victoria,” said Mr James.

Equifax found that mortgage inquiries had continued to fall from a peak reached in March this year, when inquiries spiked 82 per cent in NSW, 59 per cent in Victoria and 72 per cent across the rest of Australia.

“Mortgage enquiry volumes are a strong indicator of future loan take-outs, and economic developments related to the pandemic will continue to steer borrowers’ sentiment for many months to come,” said Mr James.

“We will be monitoring volumes closely as the economy reopens in states emerging from lockdowns to see how this will flow through to the mortgage market.”

The credit reporting agency also reported that prospective home owners had been taking steps to prepare for a new loan, even before APRA introduced tougher serviceability tests.

The number of Australians holding a credit card in the typical first home owner age group of the under 30s has fallen by 24 per cent since the start of last year compared to a fall of 12 per cent for the 30 to 40 age group.

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