First-home buyer loans are growing three times faster than owner-occupied loans
New home loans are up 7% both annually and monthly, although they remain 19% below January 2022 levels, when interest rates were at historic lows, according to the latest Mortgage Insights report from Money.com.au.
The report, which showed key trends in Australia’s home loan market, found that the average new loan size in Australia currently stands at $640,998, while investor loans average $627,000.
A significant trend identified in the report is the rise in renovation loans, which have become the fastest-growing segment. Renovation loans increased 7% month-on-month and 9% annually, driven by rising property prices, limited housing supply, and stamp duty costs.
Investor loans are also experiencing notable growth, up 15% annually, compared to a modest 3% increase in owner-occupied loans.
Western Australia is leading this trend, with a 4.6% rise in investor loans in July 2024 alone, surpassing the national average of 2.6%. Western Australia’s relatively low average investor loan size of $493,000 may be fuelling demand in the state.
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First-home buyer (FHB) loans are another area of growth, expanding at an annual rate of 8.3%, three times faster than the overall loan market for owner-occupiers. FHB loans now account for 31% of the home loan market, with Victoria and Queensland seeing the largest increases with rises of 24% and 29%, respectively, in July 2024.
The report, however, highlights the growing challenge for first-home buyers, who now need larger deposits. In 2012, FHB loans covered 73% of the average property price in Australia, but this has fallen to 65%, as house prices have surged 99% since 2012, while loan sizes have risen by only 78%.
Refinancing trends show internal refinancing is up 13% annually, while external refinancing has dropped 21%. External refinancing has seen the sharpest decline in Tasmania (-40%) and Victoria (-30%).
“Households are finding more ways to secure better deals internally but are not exploring other lenders as much as they used to,” said Peter Drennan (pictured above), research and data expert at Money.com.au.
Interest rates remain a key focus, with the gap between variable and fixed rates for owner-occupied loans narrowing to less than 0.2%. Lenders are adjusting to expectations that the cash rate will remain steady in the medium term, contributing to a slight increase in fixed rates for terms under three years.
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