Average new home loan size hits record high despite interest rate increases

New data from the Australian Bureau of Statistics (ABS) reveals that the average size of new owner-occupier mortgages in Australia has reached a record high, despite the cash rate being at its highest level since November 2011.

Key findings:

• The average new owner-occupier mortgage hit $626,055 in May 2024, the highest level in ABS records
• Queensland, South Australia, and Western Australia saw record highs in average new loan sizes
• NSW still has the largest average new owner-occupier mortgage at $767,584
• Victoria’s average new loan size fell and remains below its January 2022 peak

Sally Tindall, research director at RateCity.com.au, said: “Australia’s Teflon property market continues to rise, dragging the average new loan size along for the ride, despite the rate hikes.”

She added: “It’s astounding to think owner-occupiers are, on average, taking out larger loans than ever before despite the fact the cash rate is sitting at a 12-year high.”

Other notable points:

• The average new owner-occupier rate is 6.27%, with borrowers passing stress tests at an average rate of 9.27%
• The value of new home loans dropped in May, but was still up 18.0% compared to a year ago
• Investor lending saw a 29.5% year-on-year increase
• Refinancing activity has settled into a new norm, with values just over $16 billion every month since the start of the year
• The proportion of new and refinanced loans opting for a fixed rate was 1.7% in May, slightly up from the record low of 1.2% in April

Tindall warned potential borrowers to factor in possible further rate hikes and not to rely on rate cuts when calculating affordability.

This data highlights the resilience of the Australian property market and the willingness of borrowers to take on larger debts, despite high interest rates and economic uncertainties.