Reports suggest that property investment loans in Australia have reached record highs as investors make the most of low interest rates and low home prices.
According to the Reserve Bank of Australia (RBA) housing investment lending has reached $1.33 trillion. This now accounts for 32.9 percent of all investment loans and is the highest investment rate ever recorded.
The RBA reports that mortgage aggregates grew by 0.6 percent in January and by 5.6 percent for the 12 month period from January 2013 until January 2014. Over the same period, investor housing aggregates grew by 0.8 percent and 7.4 percent over the 12 months.
The Australian Prudential Regulation Authority (APRA) released similar statistics. However, this group only accounts for Australian Authorised Deposit-taking Institutions (ADI’s), not all lending institutions, unlike RBA data.
According to ARPA data, some 66 percent of home loans are held by owner-occupiers and the remaining home loans are held by investors. The rate of investment loans is increasing, and owner-occupiers are being more attentive with their finances.
On average, most owner-occupier home loan holders are approximately 21-months ahead in mortgage repayments. Plus, more owner-occupier home loans are said to have an offset facility with rates climbing to 34.6 percent. Finance experts suggest that owner-occupier home loan holders with an offset facility are seeking to reduce their home loan liability.
Investor lending is the highest it’s been since 2003. Typically, investors elect to take out interest-only mortgages so they can take advantage of the maximum taxation benefits. This, in turn, reduces their taxable income and allows them to retain more capital.
Report data suggests that the average home price of Australian capital cities is estimated to be $540,000, but the level of debt in comparison is relatively low. However, this may change as more ‘small deposit’ buyers come into the market.
The average amount outstanding on an owner-occupier home loan is estimated to be approximately $220,000, whereas interest-only loans are approximately $290,000. Interest-only home loan holders are not reducing their principals, therefore they typically have higher debt levels. However, these home loans are typically held by investors and the principals are paid-out when the home loan term ends.
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