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[MoreMorefinance] Mortgage Trend Over The Years.

Updated: Sep 27, 2022

Property prices over the years:

Over the past years, the average price of dwellings by states has increased quite a lot, especially with New South Wales on the top list. Over the past quarter of the century, strong housing market conditions have boosted household wealth, each state capital has recorded annual growth ranging from 5.9% to 8.1%. Besides, the typical house value nationally was just $111,500 25 years ago. Since then the value has risen on average of 6.8% per annum to $765,000, while the median unit price is $575,000.

Mortgage Size Over the Years:

Higher property values result in high demand for mortgages. In Sydney and Melbourne, over the past two growing cycles, households are dedicating a larger portion of their income to service mortgage repayments. For the people in Sydney, their dwelling cost reaches 9.3 times the median annual household income. Since 1993 mortgage rates have reduced significantly, and the average loan size was $81,500 at the time. By Jan 2022, this figure has risen to $618,789, an increase of 659%. And variable mortgage rates peaked at 17.0% in March 1990 and by the first quarter of 1993 they had reduced to 10.0%.

Fixed Rate Change

On 25 August 2022, Commonwealth Bank of Australia(CBA)announced a special interest only three year fixed rate investment loan offer of 5.49% per annum with a mortgage package. This special rate is a reduction of 1.2% p.a from the previous interest rate. While St George slashed the fixed interest rate, and their owner occupied loan fixed rate P&I repayment decreased by 0.3% to 5.34% for two year term and decreased by 0.4% to 5.54% for three year term. On 20 September 2022, Westpac announced a 0.5% rate increase for one to five years fixed rate.

Cash Rate and Housing Prices

Reserve Bank has begun raising the cash rate to curb inflation. And banks are raising interest rates also. Although interest rates matter for housing prices, they are not the only drivers. From 2002 to 2008, housing prices went up more than 30% despite the cash rate increasing three percentage points. National median house prices are rising year by year which has caused larger gap with national unit prices. For example, the national median house price in June 2022 was $765,000 while the median unit prices were $575,000.

It’s Time to Refinance

Why now might be a good time to refinance? The reasons can be divided into two aspects. One is that clients could access 80% of the equity via refinancing, and they can use this saving to purchase investment property or put into offset account. Since property values are dropping, it is wiser to do valuation sooner. Another is that some banks offer cash back and lower interest rates, and only offer better deals to new clients. Some may offer 100% LVR of residential property for secured business loans.

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