Home loan size balloons to record high, eclipsing $800,000 in NSW

The size of the average Australian home loan has jumped to an all-time high, with the average mortgage in NSW cracking the $800,000 mark for the first time as borrowers hang their hopes on the possibility of an interest rate cut next week.

Data released by the Australian Bureau of Statistics on Wednesday revealed the average Australian home loan jumped by $25,000 in the December quarter to $666,000, showing the market’s strength before the federal government announced changes on Tuesday to let Australians with education debts borrow more.

NSW had the biggest loans, with the value of an average home loan reaching an all-time high of $811,000, up from $767,000 at the same time last year.

In Victoria, the average mortgage value climbed from $608,000 in December last year to $632,000 but remained below the peak of $639,000 in June 2022 as it built more than 70,000 homes over 14 months.

The average home loan value fell just shy of $600,000 in WA, but has jumped by nearly $100,000 over the past year.

The number of new home loans rose 2.2 per cent nationally – the third consecutive quarter of growth – to more than 83,000 in the final three months of last year taking Australia’s mortgages to a total of nearly $55 billion. NSW partially offset this growth, with new loans falling 2.3 per cent, and loans to first home buyers nationally rose at a slow rate than the overall average.

With housing affordability and declining homeownership shaping up to be key battlegrounds for the upcoming election, the government on Tuesday announced a raft of measures including changes that will allow banks to exclude student loan repayments from the serviceability assessment for a loan.

A graduate earning $100,000 with a $60,000 HELP debt could borrow up to $540,000 under a debt-to-income ratio of six. With the HELP debt excluded, they could borrow up to $600,000.

Growth in the number and value of new home loans indicates demand from home buyers remains robust, with low unemployment and tax cuts helping offset higher property prices and interest rates.

The Reserve Bank will next week make its first interest rate decision of the year, with all four big banks now expecting rates to be cut by 25 basis points at the February 18 meeting.

ANZ economist Madeline Dunk said mortgage payments as a share of household disposable incomes had reached a record high, but that the number of borrowers falling behind remained around 2021 levels.

Wednesday’s data shows the number of mortgages taken out by investors fall 4.5 per cent last quarter, the first decline since March 2023.

House prices across Australia’s cities have fallen for four months in a row, including Melbourne prices that have dropped for 10 consecutive months.

Oxford Economics Australia senior economist Maree Kilroy said while a shortage in housing supply would prevent prices from grinding backwards nationally, the loss of steam in Sydney and Melbourne property markets would likely continue through the first half of 2025.

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