With property prices at record levels, the size of the average mortgage has also hit new highs, making it more important than ever that you shop around for the right loan.
Australia’s median property price reached a record $794,000 in June, up 8.0% year on year, according to CoreLogic. Meanwhile, the size of the average owner-occupied loan reached a record $626,055 at the end of May (the most recent month for which we have data), up 7.1% year on year, according to the Australian Bureau of Statistics.
Just as interest rates can vary significantly from lender to lender, so can your borrowing power, depending on your financial profile, the type of property you’re planning to buy and the location of the property. Sometimes, one institution might be willing to lend you tens of thousands – or even hundreds of thousands – of dollars more than another institution.
Trying to source all this information yourself would be very time-consuming. But brokers have an intimate understanding of the credit policies of many different lenders. That’s why, if you get a home loan through a broker, they can recommend a lender that is suitable for someone with your profile and scenario.
The federal government has allocated another 50,000 places across Australia to its Home Guarantee Scheme (HGS) for the 2024-25 financial year.
That includes 35,000 places for the First Home Guarantee and 10,000 for the Regional First Home Buyer Guarantee. Under the first program, the government supports eligible first home buyers to purchase a property with a 5% deposit, without having to pay lender’s mortgage insurance (LMI). The second program is identical, but applies to regional applicants purchasing regional properties.
The HGS also includes 5,000 places for the Family Home Guarantee, through which the government helps eligible single parents and single legal guardians to purchase a property with a 2% deposit, without paying LMI.
For all three schemes, applicants must be owner-occupiers. Income caps apply ($125,000 for single applicants, $200,000 for joint applicants), as do property price caps (which vary from state to state).
The HGS has strict conditions and is not available through all lenders. If you’re unsure whether you’re eligible or how the scheme works, reach out and I’ll be happy to help.
Record property prices are proving to be good news for vendors, with 94.3% of all vendors in the March quarter selling their home for more than they’d originally paid, according to CoreLogic. That was the fourth consecutive quarterly increase and the highest share since 2010.
However, the share of vendors who made a gross profit varied significantly from capital city to city, reflecting different market performance.
Another significant finding was that house owners were more likely to record a profit than unit owners, by a share of 97.1% to 89.0%.
Also, there was a clear link between the amount of time someone had owned a home and the size of their profit. Vendors made a median profit of $82,000 with a hold period of up to two years, $275,000 for up to 10 years, $435,000 for up to 20 years and $780,000 for up to 30 years.
Investor borrowing jumps 29.5%
Home loan volumes have significantly increased over the past year, especially among investors.
Investors committed to $10.67 billion of mortgages in May, according to the latest data from the Australian Bureau of Statistics. That was 29.5% higher than the year before.
At the same time, owner-occupier borrowing activity rose 12.2%, to $18.13 billion.
Investors were responsible for 37.1% of the home loans that were issued in May. Despite the surge, that’s only slightly higher than the long-term average (in records dating back to 2002) of 35.9%.
By way of comparison, investors’ share of home loan activity bottomed out at 22.4% in 2021 and peaked at 45.9% in 2015, while owner-occupiers’ share reached a low of 54.1% in 2015 and a high of 77.6% in 2021.
There’s been a significant increase in first home buyer activity over the past year, based on the latest data from the Australian Bureau of Statistics.
There were a total of 9,491 owner-occupier first home buyer mortgages issued across Australia in December 2023, which was 12.9% higher than the year before.
First home buyer activity rose in six of the eight states and territories, with Queensland and Tasmania being the exceptions to the rule.