Data reveals how much NSW buyers are borrowing to buy a home

Home loans have reached record highs in recent years, a clear reflection of buyers keeping pace with market strength and historically low rates.

A suite of measures has been implemented to contain excessively high levels of lending, with regulators enforcing tougher lending standards, banks moving interest rates higher and adopting a tougher stance when assessing borrower income.

The latest housing finance information from the Australian Bureau of Statistics reveals that non first-home buyer mortgage commitments increased marginally by 1.4 per cent to 17,375 loans financed in NSW during May. Activity reached the third-highest monthly figure since the peak in December 2015 at 17,587.

Home loans have reached record highs in recent years. Photo: Louise Kennerley

Despite the flurry, annual non first-home buyer figures cooled 3.6 per cent to almost 184,600 loans during the 12 months to the end of May.

Considering the speculative direction of interest rates, a level of easing is to be anticipated.

It is a matter of time before loan values crack $400,000

The average non first-home buyer loan size reached the third highest monthly value at $455,300, with buyers borrowing an additional $33,700 compared to May last year. The average size has grown considerably during the past 20 years. In 1992, the average non first-home buyer loan size was $93,900; by 2002 it jumped to $196,900 and during the next 10 years the loan size more than doubled.

Entry-level participation surged 7.7 per cent to 1600 buyers during May.

First-home buyers are extending by $3200 a year, borrowing, on average, $361,000. Values remain below the October 2016 peak of $396,500. It is a matter of time before loan values crack $400,000.

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Of the 18,975 mortgages approved during May, 1055 were for new dwellings (homes completed within 12 months of application). Buyers locking in finance for new homes grew 8.4 per cent annually.

New homes experienced the biggest surge by 20.2 per cent to 1660 loans.

Buyers constructing a dwelling are under the least financial pressure, borrowing the lowest amount at $374,200. The lending value grew by an additional $22,600 a year. New home buyers, on average, borrowed $446,200.

Buyers of established homes are under greater financial pressure. Loans for established homes hit a monthly high of $454,900, forcing buyers to fork out a further $33,400 a year.

If the speculative rate rise ensues and wages growth remains flat, it will create a tough environment for homeowners.

It is imperative that borrowers factor in future rate hikes to avoid mortgage stress.   

• Dr Nicola Powell is a data scientist at Domain Group. Tweet your questions to @DocNicolaPowell