Lenders clamping down on mortgage sizes

Jake Quade 19 April 2016

February 2016 saw the largest three-month decline in the national average mortgage size since the turn of the millennium. What's happening in Australia's property market?

A recent finder.com.au study has found that mortgage sizes are falling across the country, with the national average now sitting at $357,200. This works out to be a 4.08% slide from the previous month. If market activity is generally higher in the earlier months, why are we now seeing such a drastic slump?

Just how far has each state fallen?


The stats across the board aren't pretty:

  • New South Wales saw a monthly drop of 5.75% in February
  • Victoria and Queensland are down by around 6%
  • South Australia, Western Australia and Tasmania are down between 2-3%

If you were to look at the past three months collectively, the average national home loan has fallen a total of 7.71%. As a dollar figure, we're looking at $29,100 across the board. While it's a scary figure, it's also an uncommon one – the last decline of this magnitude was in May-July of 2000.

Some of the potential reasons for the drop

A few key changes that have occurred in Australia's property market recently could be contributing to this change. One of note is the tougher bank lending policies introduced into the market mid-2015, which would naturally have made it harder for potential homebuyers to secure more funding. When the Australian Securities and Investment Commission (ASIC) clamps down, the market tends to get a pretty thorough wake-up call.

This is thought to be a key contributing factor, but there have been a few influential changes in related statistics. For example, the latest figures from property reporting group CoreLogic show that the rate of housing price growth is slowing year-on-year, with median capital city prices rising just 0.2 percent in March. it makes sense, therefore, that if costs are going up slowly, that Australians may not need to keep borrowing as much to compensate.

Another data source – this one from credit reporting bureau Veda – shows that the demand for mortgages slowed significantly in the last quarter of 2015, with growth in mortgage applications decreasing by 2.9% compared to the same time a year before. To accentuate this, a similar pattern occurred the year prior. The point here is that if less people are desiring home loans, there will be less people fuelling the "national average" statistic.

What does this mean for potential homebuyers?

Whether the statistics are from more people being rejected for a home loan or simply a sign that less people subscribe to the great Australian dream now, your own individual ambitions and attitude to saving for a mortgage should stay the same. If you're buying a home that has genuine monetary value for yourself, you know what parts of the property you can improve and you've found the best loan in terms of rate and features, then take this stat with a grain of salt.

If you've done your homework, you may just contribute to this figure in a positive way!

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