Mortgage loans are the key to homeownership for the average Australian, with owning a home out of reach for most people without housing finance. Nonetheless, rising mortgage interest rates across the country alongside recovering house prices impacted Australia’s lending activities throughout 2023, with several aspiring homeowners reluctant to take out a home loan. The value of household lending has trended downwards over the past two years, falling to around 298 billion Australian dollars in 2023. As of January 2024, the average variable interest rate for Australian owner-occupier borrowers stood at around 7.26 percent, with the average owner-occupier fixed rate around 0.5 percent lower in the same month. While rates remained high at the start of the year, forecasts from Australia’s big four banks show rates have likely reached their peak and will start to fall in the second half of 2024, which should, in turn, accelerate buying, selling, and lending activities.
Across Australia's states and territories, the estimated average monthly new home loan repayment for existing property was the highest in New South Wales at around 4.92 thousand Australian dollars. Furthermore, according to a 2023 survey conducted among first home buyers, couples aged 25 to 34 years in Sydney, Australia, were spending an average of 51 percent of their household income on mortgage repayments for an entry-priced house, with couples in the same age bracket in Darwin using around a quarter of their household income in comparison.
Keeping up with mortgage repayments was the second most prevalent financial concern stopping first-time home buyers from climbing the property ladder, and a quarter of first-time buyers indicated not having enough savings for a deposit. The proportion of income spent on mortgage repayments per month has been on the rise, with the share of owner-occupied mortgage holders at risk of mortgage repayment stress in Australia also increasing as a result.
Mortgage lending in Australia
Australia’s big four banks, CommBank, Westpac, NAB, and ANZ Bank, are the leading mortgage lenders in terms of gross lending value in the country, with CommBank holding a market share of over 25 percent. Due to high interest rates and property prices in 2023, the value of mortgage lending trended downwards across all borrower types, comprising owner-occupiers, investors, and first-home buyers (including owner-occupiers and investors). In terms of the volume of mortgage commitments made, the number of new home loan commitments made to owner-occupiers in Australia in 2023 was around 170 thousand higher than new loan commitments made to investors.Across Australia's states and territories, the estimated average monthly new home loan repayment for existing property was the highest in New South Wales at around 4.92 thousand Australian dollars. Furthermore, according to a 2023 survey conducted among first home buyers, couples aged 25 to 34 years in Sydney, Australia, were spending an average of 51 percent of their household income on mortgage repayments for an entry-priced house, with couples in the same age bracket in Darwin using around a quarter of their household income in comparison.
Is the dream of owning property out of reach?
High property prices and mortgage rate hikes have made Australia’s residential property market inaccessible for many young people and low-income earners. As a result, the number of home loan commitments to first-home buyers has been trending downwards as the financial stress associated with taking out a mortgage deters several potential buyers. New loan commitments to first-home buyers were at their highest in 2021 due to low interest rates recorded during the pandemic.Keeping up with mortgage repayments was the second most prevalent financial concern stopping first-time home buyers from climbing the property ladder, and a quarter of first-time buyers indicated not having enough savings for a deposit. The proportion of income spent on mortgage repayments per month has been on the rise, with the share of owner-occupied mortgage holders at risk of mortgage repayment stress in Australia also increasing as a result.
