Home loan values up 70% in 18 months

Equifax has raised the alarm on how much mortgage values have shot up, warning first home buyers have been hit the hardest.

The firm’s data has shown that total mortgage limits rose by $110 billion (up by 5.6 per cent), during the year and a half from January 2020 to July 2021.

Average mortgage debt rose by 2.7 per cent over the period, an average of $13,100, while 190,000 were first home buyers.

New property market entrants had made up 23 per cent of newly opened applications, compared to home owners who refinanced (35 per cent), upgraded their property (26 per cent) or took out additional financing (16 per cent).

Kevin James, general manager for advisory and solutions at Equifax expressed concern at mortgage limits “growing at a rate faster than most homeowners’ ability to service their loans”.

The eastern seaboard has seen a greater rise in first home buyer mortgage limits than the rest of the nation.

Loans in Greater Sydney increased by 12 per cent, while the rest of NSW saw a 14 per cent rise.

Mortgages also increased by 10 per cent in Greater Melbourne and by 9 per cent in outer Victoria.

Brisbane on the other hand saw mortgage sizes grow by 13 per cent, while the remainder of Queensland had a 10 per cent rise.

In contrast, Western Australia had seen single-digit growth in first mortgages, up by 6 per cent in Perth and 7 per cent in regional areas.

“The size of first home buyer grants are similar across the board; however, disparities in the cost of living and the housing market opportunities in each state continue to be key contributing factors that are pricing mortgage borrowers out of the market, particularly in New South Wales and Victoria,” Mr James said.

Mortgage inquiries across Australia peaked in March 2021, rising by 82 per cent in NSW, 59 per cent in Victoria and an average of 72 per cent across other states, before a collective downturn in May and June as COVID restrictions were introduced.

“Mortgage enquiry volumes are a strong indicator of future loan take-outs, and economic developments related to the pandemic will continue to steer borrowers’ sentiment for many months to come,” Mr James said.

“We will be monitoring volumes closely as the economy reopens in states emerging from lockdowns to see how this will flow through to the mortgage market.”

Borrowers leaning away from credit cards

Within the typical first home buyer demographic (under 30 years), Equifax found the number of Australians holding a credit card had reduced by 24 per cent.

In comparison, 12 per cent of those between 30-40 years old have given up on their credit cards since the start of 2020.

[Related: Rising rates don’t burst property markets: PIPA]