Australia’s mortgage debt reaches $2.2tn

CoreLogic reported a steady increase in national home values, with October’s valuation exceeding September’s by $10.1 trillion.

This translates to a 5.6 per cent annual rise in home values up to October.

Despite this positive trend, the three months leading to October witnessed a more moderate increase of 2.3 per cent, down from the previous high of 3.1 per cent in the June quarter.

CoreLogic predicts a potential easing in the 28-day change in values due to factors such as the November cash rate hike, rising listing volumes, and affordability constraints.

In November, the Reserve Bank of Australia (RBA) raised the cash rate by 25 bps and its latest projections hinted at the possibility of another hike in the future.

As such, with property prices soaring and the cash rate at 4.35 per cent, Australia’s mortgage debt has reached the staggering figure of $2.2 trillion.

The data also revealed a 0.6 per cent increase in the value of new housing finance secured in September, following a 2.4 per cent lift in August.

Since February 2023, new housing lending has risen by 9.5 per cent, driven by strong growth in investor finance, up 16.0 per cent, compared to 6.1 per cent for owner-occupiers.

Nationally, investor finance constituted 35.8 per cent of new mortgage lending in September.

Meanwhile, first home buyers are actively entering the market, contributing to a 1.4 per cent increase in the value of their finance in September.

This represents an 18.7 per cent surge from the recent low in February 2023.

Currently, first home buyer finance makes up 28.9 per cent of new owner-occupier finance, surpassing the decade average of 24.2 per cent.

High debt-to-income originations fall

In terms of mortgage originations, there has been a decline in ‘riskier’ lending types.

The proportion of loans with a debt-to-income ratio of six or more fell to 6.1 per cent in the June quarter of 2023, significantly down from 23.1 per cent in the March 2022 quarter.

Moreover, loan-to-income ratios of six or more dropped to 2.8 per cent in the same quarter.

Additionally, the proportion of loans with a loan-to-income ratio decreased to 2.8 per cent from the peak of 11 per cent in October 2021.

[Related: RBA revises up forecasts]