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  • Nationwide total mortgage limits have increased by $110 billion
  • First home buyers accounted for almost a quarter of new applications
  • Data, analytics and technology company Equifax, has released new research

In the space of 18 months (January 2020 – July 2021), the value of new home mortgages has grown by 70%, leaving many with hefty loan repayments according to research from Equifax.

The average mortgage debt increased by $13,100 (2.7%) in the same 18 months, while total mortgage limits have increased by $110 billion (5.6%).

During that period 190,000 first home buyers entered the housing market, many incentivised by the government’s first home buyer scheme. They accounted for 23% of newly opened mortgage applications.

Equifax General Manager Advisory and Solutions Kevin James said he was pleased to see the first home buyer growth.

“Still, it is worrying that mortgage limits are growing at a rate faster than most homeowners’ ability to service their loans.”

Kevin James, Equifax General Manager Advisory and Solutions

Other mortgage applications groups included existing homeowners who refinanced (35%), those who upgraded their property (26%) or people who took out additional financing (16%).

The Australian Prudential Regulation Authority (APRA) tightened rules surrounding home loans in August.

But according to Equifax, there is evidence that prospective homeowners were already aware of the challenges of meeting loan repayments. They say that mortgage borrowers in particular have cut their credit cards during these eighteen months.

In the demographic of the typical first home buyer (under 30 years), there was a 24% decline in credit card holders during the 18 months. 12% of the 30-40 year old demographic did the same.

This trend could also be accounted for by the increase in savings seen during the pandemic.

Mortgage borrowers’ outlook

The volume of mortgage enquiries has increased over time. However, NSW and Victoria’s recent lockdowns have dampened prospective mortgage borrowers’ activity.

The peak for mortgage enquiry volume was reached in March 2021.

“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.

“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,” said Mr James.

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