First-home buyers home loans highest on record

New home buyers are facing repayments that are 65 per cent higher than before the pandemic, as the Reserve Bank board prepares to meet for the final time this year.

Jim Chalmers has flagged that any further cost of living relief would only come closer to the May budget. Picture: NCA NewsWire / Martin Ollman

New homebuyers are committing to larger mortgages than ever, and repayments 65 per cent higher than before the pandemic, as the Reserve Bank board prepares to meet for the final time this year.

As households struggle with intense financial pressures, Jim Chalmers on Monday revealed the Albanese government would only consider new cost-of-living measures ahead of the next budget in May.

The Treasurer said there were signs the economy and jobs market were slowing, but added that “people shouldn’t anticipate big new measures in the mid-year update next week”.

“But, as we get closer to the budget in May, if there’s more that we can do, which is consistent with our budget constraints and is right for the economic conditions at the time, then obviously we are prepared to contemplate it,” Dr Chalmers said.

Next week’s mid-year economic and fiscal outlook would show a “much healthier set of books”, the Treasurer said, but would not predict a surplus for this financial year, despite the budget already running $9bn ahead of expectations in the financial year to October.

“We’ve already delivered a surplus and the MYEFO would show a much healthier set of books than what we saw in the May budget,” he said.

“We are making welcome and encouraging progress across all these fronts, particularly in the fight against inflation, but we’re not getting carried away because there’s a long way to go.”

Australians buying a first home in which to live borrowed on average $509,300 in October, surpassing the January peak of just under $504,000, new Australian Bureau of Statistics figures revealed.

New buyers were, on average, borrowing $100,000 more than before the pandemic, the seasonally adjusted figures showed.

Rates are also substantially higher, at 6 per cent now versus 3.3 per cent in October 2019, according to the RBA.

Bigger mortgages and higher loan rates has driven a massive increase in the repayment burden.

Before the pandemic, the typical Australian first-time mortgage holder was paying $1990 a month to service their loan.

Now, that burden has jumped to $3281 per month, according to analysis by The Australian.

Economists and investors are not anticipating a move on rates on Tuesday, but Reserve Bank of Australia governor Michele Bullock has warned that the ­central bank may have to hit mortgage holders again over coming months should evidence emerge that the 13 rate hikes already delivered in the past 18 months are not doing enough to bring inflation back under control.

Alongside a record surge in net migration as foreign students and temporary workers flock back following the end of Covid-era border closures, a resurgent property market has complicated the RBA’s battle to tame high price growth.

The RBA’s board minutes from the last month’s Melbourne Cup Day meeting noted that “housing prices were continuing to rise and loan approvals had increased over prior months, both of which might indicate that financial conditions are not especially restrictive”.

There was further evidence of a reheating housing market in the ABS numbers, which showed total new home lending in October jumped by the most in almost two years, surprising economists with a 5.4 per cent increase in approvals (excluding refinancing) in the month, extending a solid uptrend since the start of the year.

At $26.7bn in October, new lending to owner-occupiers and investors was well down from the peak of more than $34bn at the start of 2022 and when rates were at record lows, but well up on the $18.9bn in the same month leading up to the Covid pandemic, the seasonally adjusted figures showed.

The average new loan size among all owner-occupiers increased to $610,300, from $589,900 in the month before, and only 1 per cent shy of the record reach in January 2022.

The average new home loan size in October 2019 was $481,600, according to the ABS.

First-home buyers in NSW committed to the biggest average loans in their cohort, at $606,500, still below the peak of nearly $638,000 in February.

The average Victorian new buyer borrowed a record $513,100 in October, with the next largest in the ACT, at $499,600.

Queensland first-time buyers’ mortgages also reached a historical high, at $466,100, a 30 per cent jump from the pre-pandemic $356,300.

The steep increase in interest rates over the past four years has compounded the burden for new buyers in the Sunshine State, with loan repayments jumping by $1252 a month since 2019 to reach $3000 – a punishing increase of more than 70 per cent.

The increase in the value of total first-home buyer lending was underpinned by a 15 per cent monthly jump in NSW, which followed increased stamp duty concessions from July.

UBS chief economist George Tharenou said monthly new home lending was up 18 per cent since its recent February low, and was now at the highest level since August 2022.

“The stronger trend of loans in recent months now suggests upside risk to our outlook for housing credit growth,” Mr Tharenou said. “Indeed, loans also provide a much stronger signal of the housing market compared with the sales volumes.”

With the housing affordability crisis showing no signs of easing despite substantially higher interest rates, the head of one of the major banks recently warned that tight lending rules and surging home prices meant the Australian dream of home ownership “has become the preserve of the rich”.