Powered by MOMENTUM MEDIA
the adviser logo
Lender

Rising average loan size not a problem, says economist

by Reporter4 minute read
House loan

According to one economist, the reported rise of the average loan size in Australia is not a cause for concern, despite continued fears over the ability for borrowers to service their debt.

Senior economist at the Housing Industry Association (HIA) Geordan Murray believes that despite household debt-income levels hitting a record high of 200 per cent, borrowers are not at risk of defaulting on their mortgages.

December Quarter Mortgage Index data collected by comparison website comparethemarket.com.au, in comparison with the Australian Finance Group (AFG), has revealed that the average Australian loan size increased by 26 per cent to $500,446 in the second quarter of the 2018 financial year.

Comparethemarket.com.au spokesperson Abigail Koch claimed that such figures are a worrying sign for borrowers.

Advertisement
Advertisement

“Household debt levels are already at alarmingly high rates, and with the average loan size growing to over $500,000, this indicates that Aussies are willing to take on deeper levels of debt,” Ms Koch said.

However, Mr Murray believes that there “isn’t an issue”, even noting that Australians are still capable of servicing their debt.

“Households are still borrowing within their means, and if they have the capacity to repay them, then there really isn’t an issue with the average [loan size],” the senior economist said.    

“The issue would arise if it turned out that we had a situation where households were overextending themselves, [and there was] an economy-wide issue.”

Moreover, the senior economist said that there is no evidence to suggest that Australians are at risk of defaulting on their mortgages. 

“At the moment, we certainly haven’t seen any issues with high levels of arrears or levels of default.

“A lot of the analyses of Australia's mortgage books show that a large share of mortgage holders are actually ahead in their repayments, so there’s certainly no evidence to suggest that levels of household debt at the moment are a problem.”

When divided into loan types, the comparethemarket.com.au/AFG data also revealed that 44 per cent are upgraded loans, 28 per cent are held by investors, 22 per cent are refinanced mortgages and 13 per cent are serviced by first home buyers.  

[Related: ‘Major structural change’ in mortgages: AFG]                    

residential rent

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

Nathan dal Bol

Expanded Home Guarantee Scheme launches

More places have become available under the expanded Home Guarantee Scheme. The scheme currently comprises the First...

READ MORE
Murray Cowan

BMM expands SMSF loan product

Better Mortgage Management (BMM) has confirmed that it has expanded its Aspire Self Managed Super Fund (SMSF) loan...

READ MORE
Clayton Howes  CEO MME

MoneyMe completes inaugural term securitisation transaction

According to MoneyMe, the $200 million term securitisation was a private placement with “three major Australian...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more