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The flat property market has made line of credit mortgages increasingly unpopular, new research has revealed.
According to data from RateCity, line of credit loans currently account for 4 per cent of all mortgages – a 13 year low.
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Back in December 2005, line of credit mortgages peaked at 10 per cent.
Speaking to The Adviser, RateCity's chief executive Damian Smith said Australians had become increasingly cautious when it comes to spending money.
"If you're not confident in the economy you're less likely to increase your borrowing," he said.
"Similar to the way in which general borrowing has declined in the last couple of years, line of credit loans have also declined.
"Nervous borrowers are conservative investors."
In addition, Mr Smith said the flat property market had also effectively hindered the popularity of line of credit mortgages.
"If asset values start going up consistently (that's property) – then people will start borrowing again," Mr Smith said.
But, according to several economists, it will be more than a few years before Australia sees any dramatic growth in property prices.
Director of Deloitte Access Economics Chris Richardson told The Adviser that property price growth would be limited to 5 per cent for the foreseeable future.
"The property market will largely flat line in 2012," he said.
"Then, in 2013, depending on what happens in the economy, both domestically and globally, we will see growth in the range of 5 to 6 per cent."
With this in mind, Damian Smith said it was unlikely that we would see an increase in line of credit mortgages in the near future.
