Australia’s home loan market has hit a record $2.48 trillion, despite borrowers facing higher interest rates and shrinking fixed-rate options.
Australians are piling into a record $2.48 trillion mortgage mountain despite back-to-back interest rate hikes, amid fears could leave them locked out of the home dream.
New banking figures prepared by Canstar from Australian Prudential Regulation Authority data show borrowers added another $14.3bn in home loans in a single month, even as National Australia Bank moved to increase short-term fixed rates.
NAB lifted its one-year and two-year fixed rates by 0.15 percentage points, taking its lowest one-year fixed rate to 6.49 per cent and its lowest two-year fixed rate to 6.54 per cent on Friday.
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Canstar rate tracking shows only three lenders now offer at least one fixed rate below 6 per cent, compared with 83 at the start of the year.
Investor lending is also growing faster than owner-occupier debt, with their mortgage balances rising 8.9 per cent over the year compared with 6.1 per cent growth for owner-occupiers.
A 0.25 percentage point rate rise from 6 per cent to 6.25 per cent would add about $97 a month to repayments on a $600,000 loan, $129 a month on an $800,000 loan and $162 a month on a $1m loan.
Canstar data insights director Sally Tindall says fixed rates are often a window into what banks think is coming next.
Port Melbourne buyers are weighing up higher repayments as Australians continue taking on record levels of mortgage debt. Picture: Jake Nowakowski.
Canstar data insights director Sally Tindall said NAB’s fixed-rate increases suggested lenders were not convinced the rate hiking cycle was finished.
“Fixed rates are often a window into what banks think is coming next,” Ms Tindall said.
“NAB’s decision to lift its short-term fixed rates suggests it’s not ready to rule out further rate rises, even though the RBA will almost certainly hit pause next month.
“Competitive fixed rates are fast becoming a thing of the past.
“At the start of the year there were 83 lenders offering at least one fixed rate under 6 per cent. Now there are just three.”
Ms Tindall said borrowers hoping for relief could be waiting longer than expected, with rates likely to remain high and potentially move “one or two notches”.
Frame Finance director Imogen Alexy says higher-rate periods can create a buying window for borrowers who can still afford repayments.
Frame Finance director Imogen Alexy said many buyers who could still afford to purchase were viewing the higher-rate environment as a chance to enter the market with less competition.
“It definitely deters some customers and it definitely affects people’s budgets, but if they can still afford to purchase, a lot of people are willing to take that opportunity,” Ms Alexy said.
“They understand they will probably be buying in a less competitive market than they would be if interest rates were lower.”
Ms Alexy said borrowers were not blindly taking the maximum amount banks would lend them, with more buyers weighing up whether repayments would fit their lifestyle if rates rose again.
“There is a big difference between what a bank is willing to lend you and what repayment actually fits your lifestyle,” she said.
“If they want to go out on weekends, have fun, travel or maintain a certain lifestyle, then the repayment needs to fit around that.
“Otherwise, they can end up feeling the strain pretty quickly.”
Whitefox Advocacy buyer’s advocate Nicholas Morrison says inflation and tax uncertainty are changing how buyers approach investment and lifestyle properties.
Whitefox Advocacy buyer’s advocate Nicholas Morrison said inflation and tax uncertainty had also changed the rules for Melbourne property buyers, particularly those considering investment properties, beach houses and other lifestyle purchases.
Mr Morrison said higher holding costs were also creating tension around some long-held family holiday homes.
“If one family member or family group is using that property more than the others, it’s creating friction in the families and therefore they’re offloading those assets,” he said.
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