Australians' home loans size grow despite falling property prices

Property prices may be falling but that hasn’t stopped Australians taking out larger loans, including first-home buyers.

The average home loan size of owner occupiers in Australia has increased 7.5 per cent since last July to $408,600, according to new ABS housing finance figures.

First-home buyers across the nation aren’t too far behind either as their average home loan was valued at $345,800 – a 7.4 per increase.

First-home buyers in NSW were taking out even more money to secure a property with the average home loan valued at $391,700, an increase of 6.1 per cent since July 2017.

Despite a slight dip from June, Domain Group senior research analyst Dr Nicola Powell said the overall trend of bigger mortgages in a softening marketing was a cause for concern.

“Anybody seasoned in the property market is certainly being more cautious whereas first-home buyers are actually borrowing more as well non-first-home buyers,” Dr Powell said.

“That goes against what you would think in a softening market.”

Dr Powell suggested tighter lending restriction could have filtered out thin, sketchy borrowers out of the market and making way for stronger loan applicants. She said financing higher loan-to-value ratios may be pushing up the average home loan size as a result.

Meanwhile, the number of investors entering the market slid further by 1.3 per cent in July 2018, continuing a downward trend since 2015.

Dr Shane Oliver, AMP Capital’s chief economist, said: “As property prices have gone down, investors are less interested in getting into the market.”

He suggested last year’s introduction of generous first-home buyer concessions, including stamp duty exemption and one-off grants, may be the reason for the increase in their mortgages.

“Maybe they’ve been able to afford more expensive property and that’s increased their average loan size and we have seen an increase in first-home buyer share of the owner-occupier market,” Dr Oliver said.

Dr Oliver forecast home loan values should eventually decrease as property prices are expected to fall another 10 per cent.

“We are seeing an overall decline in lending commitments,” he said.

Until then, Dr Powell warned that borrowers, especially first-home buyers, ran the risk of negative equity, as well as being unable to service their mortgage at a time three of the four big banks raised out-of-cyle interest rates.