Aussie homeowners spend $50 billion extra on home loans through pandemic

As holiday plans were cancelled through the pandemic, Aussies have pumped a massive $50 billion into their mortgages, getting up to 45 months ahead of repayments.

Some lucky homeowners have given themselves 45 months of breathing room after getting nearly four years ahead of their mortgage repayments.

Australians have poured in a whopping $50 billion extra into their home repayments over the past two years against the backdrop of the Covid-19 pandemic.

Low interest rates coupled with minimal spending and the inability to travel overseas has resulted in households flush with money – with their mortgages being one obvious choice of what to do with the extra cash.

Market Economics managing director Stephen Koukoulas said this was good news for people who were homeowners before the pandemic.

However, anyone who recently jumped on the property ladder is set to miss out on the gains of this unusual period in time.

“The pandemic changed a lot of things, we did tend to stay at home, didn’t get to spend our money on luxurious things like holidays,” Mr Koukoulas told news.com.au.

“I suspect a lot of people thought they were going to take advantage of the bad times to pay off their mortgage.”

Homeowners who entered the housing market before 2020 have had a great two years in terms of personal finances. Picture: NCA NewsWire/Daniel Pockett

Data released on Monday by the Australian Prudential Regulation Authority (APRA) found that by the end of 2021, the average Aussie homeowner had overpaid the bank 45 months worth of mortgage instalments.

That’s compared to Aussie households being just 32 months ahead at the beginning of 2020, when the pandemic was just beginning.

In that same period of time, homeowners funnelled an extra $20,000 into their mortgage offset accounts.

For people who took out their mortgage as recently as five years ago, they are set to benefit under the changes.

Mr Koukoulas advised it could be the difference between having a 30-year loan or a 20-year loan.

“You’ve still got to pay it [the mortgage] off, but you’ve probably knocked off a good six or seven years,” he sad.

“If you took out a loan 10 or more years ago the effect is probably even bigger.”

New homeowners missed out on any windfalls or savings opportunities to get ahead of their loans. Picture: NCA NewsWire/David Swift

However, Mr Koukoulas warned that homeowners were soon going to be stung by interest rate hikes.

Interest rates are currently at a record low, making it easier than ever to get ahead of mortgage payments.

But the finance pro said we could see a rise in interest rates as early as mid-2022.

“Middle of this year or might be pushed back to the latter part of this year because of Omicron,” he said.

“Assuming we don’t get the Greek letters after Omicron, then the economy will bounce back, and we’ll see the RBA [Reserve Bank of Australia] tighten rates a bit.”

On Friday, ANZ revealed Australians have been spending money at record lows in the New Year, the same amount spent during NSW and Victoria’s harsh Delta lockdowns of mid-2021.

Despite this, Mr Koukoulas said at most Omicron had “postponed” interest hikes but they are still looming for the distant future.

“This is sort of a self-imposed lockdown largely. When it ends, whether it’s six or eight weeks or three months, history shows we’ll be happy to spend again. The economy always bounces back,” he said.

“Over the next six, 12, to 24 months, interest rates will be moving higher.”

Hitting homeowners’ hip pockets

Even with the rate rise, homeowners are in a good position, he said.

“It is a good thing people are ahead in their repayments,” Mr Koukoulas said.

“If you’re one of these lucky people who are so far ahead, you probably don’t need to increase your payments when rates go up.

“It might take a while to hit your hip pocket.”