Total reached more than $257 billion in September
The total amount in residential offset accounts rose to a record high of $257.20 billion, according to the Australian Prudential Regulation Authority’s Quarterly ADI Property Exposure statistics.
The report found that the money in residential offset accounts increased by 7.2%, which amounted to $17.24 billion in September. The new record came as borrowers began to stash cash into their mortgage in order to mitigate the impact of the Reserve Bank’s rate hikes.
“It’s incredible to see money in offset accounts continue to rise in defiance of the rate hikes, posting a new record high of over $257 billion,” said Sally Tindall (pictured), research director at RateCity.com.au. “While the ability of Australians to keep channelling money into their offset accounts is surprising, the focus of households to offset higher rates is not.”
Tindall said that the tax returns that came in from July were likely to have helped in boosting the offset balances of borrowers which had risen by $17.20 billion in a single quarter.
“Since the start of COVID, Australian households have put their family’s finances high on their agenda, a priority that has only amplified in the face of rising rates,” said Tindall.
Tindall noted that the resilience of Australians when it comes to keeping up with the rising mortgage repayments can be seen in the arrears data.
The value of loans that were overdue for 30 to 89 days had notably increased for the fourth consecutive quarter to 0.54% of total credit outstanding. For the value of non-performing loans, the number rose for the third consecutive quarter to 0.8% of credit outstanding.
While on the rise, it was still low based on previous data, as the former had been 0.75% in June 2020 while the latter was 1.11%.
“Interestingly the data shows owner-occupiers are more likely to be in arrears than investors, albeit slightly,” said Tindall. “Investors have been able to pass at least part of their increased mortgage costs on to their tenants without having to worry about losing them to a different landlord, because there just aren’t an abundance of properties for tenants to move to.”
Tindall also said that the value of new loans that were approved outside of the serviceability policies of banks had increased this quarter after three of the big four banks had dropped their stress test to 1% for borrowers that were looking to refinance earlier this year.
With APRA requiring banks to conduct a stress test to make sure a refinancer can meet the mortgage repayments if rates rose by 3% further, Tindall said that the banks working to help their borrowers refinance to lower rates should be applauded as they avoided falling into mortgage prison.
“APRA should consider changing their guidance to encourage more lenders to reduce their standard serviceability tests to help borrowers out of mortgage prison,” said Tindall.
