 Mortgage stress for home owners
Average loan amounts have been rising during the 12 months, as record low interest rates tempt people to borrow more. The boost to the first home owner grant also led to many first time buyers entering the market.
But with rate set to start rising as soon as November, one property investment group is warning many young people could find themselves hit hard by the increased rates and repayments.
The Investors Club warn that the worst hit state will be Western Australia where the first home loan average amount has risen by $41,000 in the past year.
Richard Van Proctor is the club's acting president and says home owners could find themselves in considerable mortgage stress after the Reserve Bank starts to lift rates as expected later this year and early next year.
"People have taken advantage of the first-home buyers grant and rushed in to buy properties because they got the deduction on stamp duty and they got the government subsidy," he said.
"But as interest rates rise, the average person with their first-home loan is going to struggle."
South Australia has seen average loan amounts rise by $22,000 and Victoria and Tasmania both saw increases of $21,000.
In NSW the average loan went go up $18,000 while it rose $12,000 in Queensland.
The boost to the first home owner's grant is set to be reduced from $14,000 to $10,500 for existing homes and from $21,000 to $14,000 for new homes, then December 31 sees it revert to $7000 for all first home buyers.
Estate agents and mortgage brokers have been reporting an increase in first time buyers since the boost was announced and then extended.
Official interest rates are at a 49-year low of 3 per cent and home loan rates hover around 5.75 per cent. But when rates start to rise later this year and into next year, some home owners could find the increased repayments are a lot harder to swallow. If mortgage rates rise by 2 per cent this would add around $450 per month for mortgage repayments on a $340,000 mortgage.
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