Nicola Powell: How much are Canberra buyers borrowing?

Home loans have reached record highs in recent years, a clear reflection of buyers keeping pace with market strength and utilising historically low rates.

A suite of measures have been implemented in order to contain excessively high levels of lending, with regulators enforcing tougher lending standards, banks moving interest rates higher, new loan applications scrutinised and a tougher stance when assessing borrower income.

Changeover mortgage commitments (also referred to as non-first homebuyers) dipped 6.6 per cent to 984 loans financed throughout June, according to the latest figures released from the Australian Bureau of Statistics. This is the seventh highest monthly figure on record. The monthly drop to activity levels follows on from the second highest changeover loans ever recorded last month.

Despite the slight activity cool, the 2016-17 financial year closed with the second highest changeover buyer loans financed on record. There were 10,687 changeover buyer loans approved last financial year, dipping marginally by 0.7 per cent compared to the prior financial year, this only equates to 78 fewer loans approved. Considering the speculative direction of interest rates, a level of easing is to be anticipated.

The average changeover loan size reached the seventh-highest monthly value on record at $373,600, with purchasers borrowing an additional $3,100 compared to June last year. The average size has grown considerably over the past twenty years. June 1997 the average changeover loan size was $109,700, in the next ten years the average loan more than doubled to $278,100 in June 2007.

Entry-level participation surged to 18.9 per cent of the owner-occupied mortgage market, with 229 buyers hopping onto the property ladder during June. This is the highest number of first homebuyer loans financed in the month of June since 1994. The 2016-17 financial year closed with a higher first homebuyer participation rate than the previous, with 1,833 loans approved accounting for 14.6 per cent of the overall owner-occupied loan market.

Loan capacity dropped by $22,400 annually with first homebuyers borrowing on average $294,300. Values remain well below the December 2015 peak of $344,800. In June 1997 the average first home loan was $96,300, by June 2007 the value jumped to $222,700.

The new financial year has seen initiatives activated by the NSW Government designed to ignite entry-level activity. Stamp duty has now been axed in NSW for new and established homes up to the value of $650,000 with a sliding scale of concession in place for homes between $650,000 and $800,000. The impact on the ACT first homebuyer market is inevitable, encouraging buyers to purchase across the border.

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Looking ahead, if the speculative rise to rates ensues and wages growth remains flat it will create a tough environment for homeowners to service repayments. It is imperative to factor future rate hikes to avoid mortgage stress.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell