Media Release

finder.com.au warns property hunters: don’t take on too much risk

  • Almost double the number of Australians searching for interest-only home loans on finder.com.au/home-loans
  • finder.com.au research shows average home loan size increased by $24,000 since last year
  • Average loan size up by $24,000, with NSW seeing biggest rise of $30,700 since last year

September 27, 2014, SYDNEY – One of Australia's biggest comparison websites finder.com.au is warning property hunters about the dangers of taking on too much risk, following a spike in interest-only home loans and bigger loan sizes.

There were almost double (81%) the number of Australians looking for interest-only home loans on finder.com.au/home-loans since last year (30 days to September 25, 2014 compared to the same time last year).

The Reserve Bank of Australia also released a Financial Stability report this week, which showed concerns about the higher number of interest-only home loans financed, as well as home loan sizes have increased on average.

Over one in three home loans financed (35 percent) were interest-only since the March quarter to June quarter 2014, the highest level since this data was collected (2008) according to a finder.com.au analysis of Australian Prudential Regulation Authority (APRA) figures.
finder.com.au also found that the average home loan size is at a record high of $319,000 – $24,000 higher than last year.
Michelle Hutchison, Money Expert at finder.com.au, said she is concerned that borrowers are taking on too much risk before interest rates rise.

“It's a real concern to see borrowers taking on more risk because interest rates are at record lows and expected to rise next year, which means borrowers can find themselves in financial trouble if they take on more debt than they can afford.

“For instance, if interest rates rise back to historical average levels of 5 percent, it would cost borrowers with a $300,000 home loan an extra $400 per month or about $4,800 in one year.

“It will hit them twice as hard if they move from interest-only to principal and interest repayments.

“Interest-only home loans can end up costing you a lot more in the long-run and adds higher risk to your financial situation, particularly first home buyers. With lower deposits, they are also at risk of negative equity if their property value falls and if they need to sell up they are at risk of owing the bank money after closing the loan,” said Mrs Hutchison.

Difference in average home loan sizes in each state compared to last year:

StateJuly 2014July 2013Difference
NSW$366,700$336,000+$30,700
VIC$333,000$293,300+$39,700
QLD$301,300$282,200+$19,100
SA$263,100$245,200+$17,900
WA$312,800$296,400+$16,400
TAS $215,500$208,300+$7,200
NT$341,300$331,700+$9,600
ACT$329,700$329,600+$100
National average $319,000$295,000+$24,000

source: finder.com.au, Australian Bureau of Statistics Housing Finance (original)

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Disclaimer

The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.

About us

More than 3 million Australians turn to finder.com.au every month to save money, time and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.

Our free service is 100% independently-owned by two Australians: Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.

We continue to expand and launch around the globe, and now operate in the United States and United Kingdom. For further information visit www.finder.com.au.

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