Login
ISCOVER
By: Jessica Darnbrough
Rising interest rates and the wind-back of the federal government’s first home owner’s grant have contributed to the decline in the average home loan size.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
The Group's latest report found the average loan size dropped from $304,266 in December 2009 to $298,011 in March 2010.
Similarly, the report found that demand for home loans has declined for five consecutive months.
The brokerage’s national manager for operations and risk Ivan Karamatic, said the RBA’s decision to lift the cash rate by 1.25 per cent to 4.25 per cent since October last year had impacted the home finance market.
“Moreover, a big increase in first time buyers last year as a result of the federal government doubling the size of the first home owners grant was the underlying reason for a rise in the size of loans during 2009,” he said.
“But since the grant returned to normal levels at the beginning of January this year there has been a notable drop-off of first home buyers.”
Mr Karamatic said stricter lending practices by the major banks were also having an influence on the average home loan size.
“Finance is harder to obtain with the major banks tightening their lending regimes and insisting on buyers having genuine savings,” he said.
Mr Karamatic added that any future decision by the RBA to move the official cash rate back to pre-GFC levels may impact home loan demand.
“There’s been speculation that the RBA could be moving the cash rate back to pre-global financial crisis levels’” he said.
“That should be of concern to the market and homeowners as our own surveys have found people are carrying significant debt levels.
“If official rates go as high as some suggest and push variable mortgage rates back up to around eight per cent then a lot of mortgage holders will be struggling to make their repayments,” he said.
