The average Australian is taking on more debt than ever before as the average mortgage on existing homes grows to nearly $500,000. Coming on the back on ultra-low interest rates and flatlining wages, this growth is prompting concern in many circles, particularly now with a recession now tipped for Australia.
Figures from the Australian Bureau of Statistics show the average mortgage on an existing dwelling in New South Wales grew by $112,600 or 22.2% through 2019 to hit an all-time high of $621,500. In Victoria, the average mortgage swelled by $64,800 to $517,900 while in Queensland it lifted 15% or by $54,800 to $419,800.
Every state and territory recorded a mortgage increase well above the lift in wages, which grew by 2.3% throughout the year. Quite a lot of this increase took place from the middle of 2019 onwards, which has been linked to the Reserve Bank of Australia (RBA) cutting official interest rates to 0.75%, a record low.
CommSec chief equities economist Craig James said while the national average mortgage was now at $500,000 it would be difficult for it to grow much faster given the drag on incomes for most borrowers. He continued on to note that the RBA may become concerned if mortgages continued to rise, although the emerging Coronavirus scare will no doubt put downward pressure on confidence we would now expect, limiting this mortgage growth.
The RBA governor Phillip Lowe actually noted in early February that if people continued to borrow more to buy a home whilst also carrying “quite high” debt, this could cause broader economic problems for the nation.
The total value of home loan approvals jumped by 4.4 per cent in December to be 14 per cent higher over the year. Since the most recent low point in May, new loans have climbed by 20.7 per cent with loans to owner-occupiers up by 22.8% over the same period. First-time buyers have also taken advantage of the combination of low interest rates and better prices. Loans to this segment grew by 6.2% in the month to be up 38% over the year. First-time buyers accounted for 30% of the owner-occupier market. There were also signs of a lift from investors with the value of investment lending up by 2.8% in December to be 4.9 per cent better over the year.
All of this lending growth came as house prices in Sydney and Melbourne have been climbing by more than 1% per month. CoreLogic’s daily house value index is showing that both markets are continuing to grow, with Sydney values up more than 0.6% in February while Melbourne has climbed more than 0.5%.