Survey finds 30% of Australians would consider longer loan terms for lower monthly repayments
Australian borrowers are being cautioned to consider the long-term financial impact of extended home loan terms, as new research from Finder highlights growing interest in 40-year mortgages.
The comparison site’s survey of 1,013 respondents found that 30% of Australians — equivalent to 6.2 million people — would consider a 40-year mortgage if it meant lower monthly repayments.
Currently, four lenders in Australia offer 40-year home loans, with three of those products available exclusively to first-time buyers, according to Finder’s analysis.
Data from the Australian Bureau of Statistics (ABS) shows the average home loan size in Australia reached a record $641,416 in September 2024. This marks a 37% increase from September 2019, when the average loan size was $467,403.
Graham Cooke (pictured above), head of consumer research at Finder, noted that while longer loan terms can make monthly repayments more manageable, they come with significant long-term costs.
“Owning a home has felt out of reach for an increasing number of Aussies,” Cooke said. “A 40-year loan can help some buyers get into the market sooner by reducing monthly repayments. While these loans may have lower monthly repayments, they typically end up costing a lot more over time.”
Finder’s analysis revealed that extending the average loan term from 30 to 40 years would reduce monthly repayments by more than $300. However, borrowers would pay an additional $316,000 in total interest over the life of the loan.
“Essentially, these loans give you a reduction in your monthly cost in exchange for a significant increase in the cost of your mortgage overall,” Cooke said. “Borrowing costs and house prices have combined to make the housing market less affordable for many Aussies. While 40-year loans do offer a lower cost route to getting your first foot on the housing ladder, staying with them until the end can be very expensive.”
Cooke also pointed out that competition is re-emerging in the home loan market.
“I naively took out a 40-year loan when purchasing my first apartment, only to quickly realise how costly it would be in the long run,” he said. “Fortunately, I was able to sell the apartment a few years later.”
Cooke added that the recent cash rate cut may provide some relief for overstretched borrowers.
“The good news for those struggling is that what goes up must come down, and the cash rate has now fallen — welcome relief for those who have overextended themselves,” he said. “Before extending your loan term to ease cash flow pressure, consider refinancing to a cheaper variable rate first.”
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