Bigger loans expected while interest rates remain low

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With the RBA announcing no change in the official interest rate in September, experts believe that the size and number of home loans may increase.

Data from Finder.com.au shows that historically, consumers applied for more home loans in the months following a Reserve Bank rate cut.

During the last 12 instances that interest rates were dropped, the amount of the average loan increased. First home loan values could increase up to $5,260, while the average loan size for new home mortgages could increase by $6,480.

With the average home loan currently at $360,100, Finder.com.au’s insights manager, Graham Cooke, mentioned that with interest rates expected to remain low, the average home loan is forecast to increase as well.

“The potential danger with an unprecedented low rate market is that borrowers, particularly first-home buyers, may be enticed to increase their borrowing budgets in order to get into the property market,” said Cooke, said in an interview with The Australian.

“As a result, some may be borrowing more than they can afford in the long-term.”

A separate study by CoreLogic showed that the average home value increased by only 7% in the last 12 months, compared to 11% in the 12 months prior.
 

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Tuesday, Sep 26, 2017
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