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40% leveraging home equity to get ahead on repayments: NAB

Over four in 10 home owners are using the equity in their home to get ahead on their mortgages, a NAB survey has found.

According to the latest NAB Housing Market Insights Report, many home owners who have seen an increase in the value of their homes in recent years are looking at ways to leverage the equity their property holds. 

The survey, which was conducted from April 26 to May 1 this year, found that four in 10 out of the 500 Australian adults surveyed had grabbed the chance to get further ahead on their loans. This was typically done by making larger or more frequent repayments, or by making a lump sum payment.

People in the highest income groups were the most likely to be using additional home equity to pay down their mortgage (53 per cent).

The data also showed that mortgage holders aged 18-44 were more likely to take the chance to chip away at their debt early, compared with those who are aged over 45.

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Indeed, two in three Aussies aged 18-24 were using it to pay down their loans.

Most people in all states were using additional equity to pay down their mortgages, with the exception of SA (where most were using it to renovate).

By region, most people in capital cities were using this equity to pay down their mortgages (48 per cent)..

However, nearly 28 per cent of people living in rural areas, and 22 per cent of people living in WA, had not used any additional equity in their homes for other purposes. This was a similar proportion for those in NSW (20 per cent),

Older home owners aged over 65 and those earning lower incomes ($35-50,000 p.a. ) were the most likely groups to have not have used any additional equity in their homes for other purposes.

70% to invest or renovate

However, nearly seven in 10 Aussies were using the equity in their home to renovate their home or invest in property.

Approximately a third who had renovations on the agenda were unlocking the useable equity and borrowing more to make the changes.

Millennial mortgage holders (aged 25-44) were found to be more likely to use their equity to renovate compared to other age groups.

Those in the $75-100,000 p.a. and $35-50,000 p.a. income groups were most likely to renovate (both around 40 per cent). 

Meanwhile, 16 per cent were putting equity towards an investment property, 12 per cent were using their equity to invest in shares (12 per cent) while 8 per cent were pulling equity to add it to their super.

Perhaps unsurprisingly, older home owners (those aged 45-54) tended towards investing it in superannuation. 

Noticeably more people in the highest income group also purchased additional property (23 per cent) and invested in their super (17 per cent). 

Andy Kerr, NAB’s executive home ownership, said with many NAB customers ahead on their loans, it was interesting to see them utilising their equity to get further ahead. 

“We’re fielding more enquiries today about how to use equity than we’ve ever seen,” he commented. 

“Customers are wanting more security and certainty, so it is not surprising in this environment of rate increases that we are seeing Aussies paying down their mortgages even further.”

He added that as the norm for work set-ups continues to change, there will be more Aussies who will catch the renovation bug. 

“As hybrid working continues to evolve, many Aussies are taking the opportunity to build a new study or finally get that dream kitchen,” he surmised. 

The data showed that more borrowers are moving to get ahead on paying down debt while interest rates are still relatively low.

According to a borrower survey commissioned by finance platform Money.com.au, which sought to gauge how financially prepared Australians are for a new environment of higher interest rates and the rising cost of living, eight in 10 borrowers have savings buffers and nearly two-thirds can meet a 0.5 per cent rise or more.

As part of the survey, conducted by Pureprofile in late April 2022, respondents were asked to specify how much money they have in their mortgage offset account, home loan redraw facility or savings account, to determine whether they have a substantial financial buffer to navigate increasing costs.

They were also asked what size of an interest rate rise they could cope with in order to continue servicing their loan.

According to the survey, 80 per cent of mortgagors have a buffer in their home loans to meet interest rate rises.

More than two-fifths (42 per cent) said they had more than $20,000 in a mortgage offset account, home loan redraw facility or savings account, while more than a quarter (28 per cent) had more than $50,000, and 14 per cent had more than $100,000.

Victorians were most likely to have savings buffers in place than borrowers in any other state or territory, with more than half (51 per cent) of Victorian borrowers having more than $20,000 to pull from and 28 per cent having $50,000 or more. 

[Related: 80% of borrowers have savings buffer, new survey finds]

40% leveraging home equity to get ahead on repayments: NAB
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