Renovation loans boom over past 12 months
Money.com.au has released its latest Mortgage Insights report, highlighting notable trends in the Australian home loan market.
The report revealed a significant increase in renovation loans as one of the fastest-growing areas in new loans, despite ongoing high interest rates and inflation.
Renovation loans are showing the most significant growth, increasing by 7 per cent monthly and 9 per cent annually.
Money.com.au’s home loans expert, Mansour Soltani, attributed this trend to rising property prices, a limited supply of new homes, and the cost of stamp duty, which are driving home owners to renovate rather than purchase new properties.
The average new loan size in Australia is $640,998, with the average loan size over the past 12 months for owner-occupiers being $616,000, and $627,000 for investor loans.
Despite the challenging economic conditions, new home loans have risen by 7 per cent annually and monthly. However, they are still 19 per cent below the levels seen in January 2022, when interest rates were at record lows and many borrowers were fixing their mortgages.
Investor loans are also on the rise, growing by 15 per cent annually, while owner-occupied loans have seen a more modest annual increase of 3 per cent.
The growth in investor loans is particularly strong in Western Australia, which saw a 4.6 per cent increase in July alone, compared to the national average of 2.6 per cent. Western Australia has the third-lowest average annual investor loan size at $493,000, which may be contributing to the high demand for investor loans in the state.
First home buyer loans are expanding at three times the rate of the overall owner-occupier loan market, representing 31 per cent of the home loan market.
New first home buyer loan numbers are growing at an annual rate of 8.3 per cent. Victoria, which saw a 24 per cent increase in first home buyer loans in July 2024, contributed significantly to this growth, though Queensland has experienced a 29 per cent rise year-on-year.
Interest rates have seen a narrowing gap between variable and fixed rates for owner-occupied loans, now less than 0.2 per cent.
This change is attributed to lenders adjusting their expectations for the cash rate to remain steady in the near term. Fixed rates of less than three years have increased by 0.08 per cent in July 2024.