AUSSIES planning to renovate or build new are scrimping on their wish list amid the rising cost of living, with latest data showing average loan sizes for the purpose of home building fell by almost 30 per cent.
National data from home loans marketplace Joust shows the average loan size accessed through Joust’s Instant Match in the Build category were down from $741,667 to $533,643 in July compared to the previous year.
By contrast, loan sizes for the purpose of refinancing were down by just 1.26 per cent, while the size of loans to buy a new home shrunk by 6.81 per cent.
In Queensland, the average loan size across all categories fell 6 per cent, from $469,511 to $441,258.
Joust head of revenue and operations Ranin Mendis with Joust chief executive Carl Hammerschmidt.
Joust CEO Carl Hammerschmidt said access to government grants combined with higher household savings gave borrowers impetus to take out bigger loans in 2021.
“Record low interest rates meant that lenders were seeing interest not only from people looking to get into their first home, but others who could borrow to build their dream homes without having to worry much about the interest they would be paying back,” Mr Hammerschmidt said.
“As our data shows, interest for bigger loans in those categories has dropped off significantly in the last 12 months. At the same time, the needle on average loan amounts for the purpose of refinancing has moved very little, and Aussies remain keen to get the best deal.
“We anticipate the average size of loan in this refinance category to grow in the final quarter of 2022 and into 2023 as many come to the end of their fixed interest rate periods on home loans,” he said.
Build new … at what cost?
Gold Coast Mortgage Broker Adam Hall said rising interest rates meant those looking to either buy or build would find their maximum borrowing capacity reduced as the banks applied a buffer of around 2.5 to 3 per cent on top of their rate.
“It has resulted in the borrowing capacities for all borrowers taking a significant hit since March this year,” Mr Hall said.
Today’s variable rate was sitting at about 3.5 per cent, compared with 2 per cent in March.
“So when that servicing buffer is applied in today’s marketplace, people are having to accept pre-approvals at smaller loan amounts than twhat they have have wanted and got back in March.”
Borrowing capacity is affected as interest rates rise
MORE NEWS
Why homebuyers aren’t buying
Property industry calls for repeal of new land tax
‘Afterpay for houses’ to beat deposit hurdles for middle income families
Master Builders Queensland Gold Coast regional manager noted a direct correlation between rising interest rates and new building approvals across the state.
“As the interest rate has increased the new home approval figures have started to dip. This is further collaborated by new home loan data also starting to soften,” Mr Profke said.
“It is important to note that there is still a significant amount of work in the pipeline for all sectors of the industry that is currently being finished off.”
Home approvals have also started to dip
Australian Bureau of Statistics figures show total dwelling approvals in Qld were down 13.7 per cent between June and July.
The post Home build loan size shrinking as rates rise appeared first on realestate.com.au.