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Australian home loans in October 2024
Home lending pushes to new highs
Sean Callery
Editor
The home loan market in Australia continues to strengthen, with 7% more loans settled compared to a year ago. Loan sizes are growing too. The reason? Home prices continue to rise due to a relatively low supply of new property listings and high population growth, among other factors. This means higher loan amounts are required. A lot of the lending growth is being driven by new investor loans, which have now passed their previous peak levels. Total loan value is also headed towards the peak levels last seen in 2021 and 2022. The average loan size for new and existing dwellings has never been higher. Higher loan amounts mean higher costs for borrowers. Getting a good deal on your mortgage has never been more important.
Mortgages in Australia by the numbers
Australians who use a mortgage broker for their home loan
74%
Average new home loan
$640,998
Australian homeowners who switch their mortgages each month
32,000+
Average borrower is paying
6.28% p.a.
Average monthly repayment (over 30 yrs)
$3,959
Total value of new home loans issued per month
$32.11 billion
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Help me buy my first home
Frequently asked questions for first home buyers.
What is a mortgage?
A home loan or mortgage is used to finance a home or investment property. Home loans are usually 'secured' against the property you're buying. That means the lender can sell the property to cover the loan amount if the borrower can't repay the loan.
You can choose between a variable rate home loan or a fixed rate mortgage. Mortgage terms in Australia range up to 30 years.
Do I need a mortgage broker?
You don’t necessarily need to apply for a home loan through a mortgage broker. Borrowers are free to compare options themselves and apply directly to their lender of choice. However, the majority of people in Australia (around three in every four) get their home loan through a broker.
Particularly for first-home buyers, a broker can help you understand the process, check your borrowing power, compare loan options and guide you with your application.
Your broker will also help you figure out how much of a home loan deposit you need.
How will my credit rating effect my home loan?
Lenders check your credit score when you apply for a home loan. If you have a good credit score, your chances of approval will be higher compared to a borrower with a lower score. Having a high credit score means you're more likely to be eligible with the widest range of lenders, meaning you'll have more scope to get the best deal on your loan.
How long does the process take?
The process of getting a home loan usually takes somewhere between 2-6 weeks from start to finish. But it can take longer if there are any complications. It’s important to allow time to thoroughly research and compare options, complete your application carefully, gather and provide all supporting documents (pay slips etc.) and then wait for the lender to assess your application. If you’re approved, you will need to review and sign the loan contract.
If you have signed a contract to buy a house subject to finance, most lenders will prioritise your application to meet the timing of the finance clause (typically 14 days).
What types of mortgages are there?
- Owner-occupier home loan: This is a standard home loan to buy a property you want to live in.
- Investment home loan: You can take out this home loan to buy an investment property (one from which you can get rental income).
- Variable rate home loan: This is a home loan where the interest rate can go up or down throughout the life of the loan.
- Fixed rate home loan: The interest rate on the loan is fixed for a period of time — typically between one and five years.
- Interest-only home loan: You only pay the interest component of your loan for a set period (up to five years).
- Principal & interest home loan: You pay both the principal of your home loan and the interest throughout the loan term.
- Construction loan: Designed for borrowers who plan to build a home or investment property, allowing you to withdraw funds in stages as needed to complete the construction.
- Land loan: A property loan used specifically to purchase vacant land or a house and land package.
- Low deposit home loan: Allows you to buy a home with a 5-10% deposit, instead of the standard 20% of the property’s value most lenders require.
- Low doc home loan: A low doc home loan requires minimal documentation when you apply. It’s often used by business owners or self-employed individuals who can’t provide the standard documents most lenders ask for, like payslips.
- Guarantor home loan: A guarantor home loan is backed by another person, typically a parent or family member, with home equity that’s used to secure your loan.
- Bridging loan: A short-term loan designed to cover the financing gap between purchasing a new property and selling an existing one.
- SMSF loan: This is a home loan used by a self-managed super fund (SMSF) to purchase an investment property.
- Bad credit home loan: Allows borrowers with a bad credit score/credit history to secure a home loan and purchase property.
EXPERT TIP: Traditionally first home buyers have needed to save up at least a 20% deposit to get a loan and avoid expensive lender's mortgage insurance (LMI). But it's now common for buyers to get a home loan with a deposit as low as 5%, with the help of a guarantor or through the government's First Home Guarantee scheme. It's worth exploring these options if you're eligible.
Looking to refinance?
Everything you need to know about refinancing your home loan.
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Top refinance FAQs
How do I refinance my home loan?
Refinancing your home loan means switching your loan to a different product or lender, or increasing your loan size. For example, you might switch from a variable to a fixed rate loan with your current lender, or stay with the same lender and increase your loan balance. Alternatively you could do the same but with a different provider.
If you’re increasing your loan amount, the lender will generally carry out a credit assessment, even if you’re staying with your current provider. They do this to ensure you can afford the repayments based on the higher loan balance. The lender will usually also arrange for your property to be valued.
If you’re switching lenders to get a better deal, the new lender will treat your application much like they would if you were buying a property for the first time. That means they will assess your financial situation, borrowing capacity and get your property valued.
Once you’re approved, refinance home loans work just like any other kind of mortgage product.
What does it cost?
There are several potential costs to factor in if you refinance your home loan. You’ll have most of the same costs as you did when you got your loan initially (e.g. establishment fee and valuation fee), as well as a discharge fee charged by your old lender. Overall, expect to pay between $500 - $2,000.
If you’re staying with the same bank the cost of refinancing is generally lower and may even be nothing if it's a straightforward product switch.
Some lenders have home loan cashback offers for new customers, which could help offset the cost of switching if you're eligible.
Is it easier to refinance with a mortgage broker?
Refinancing with a mortgage broker may save you some time, as the broker does a lot of the work for you. It can also be less of a hassle to have an expert do the research for you and simply present you with deals that are better than your current one. Your broker can also negotiate on rates and fees with your existing lender and any new ones you’re considering to make sure you’re getting the best deal possible.
If you decide to go ahead with the switch, your broker will also help with your application and any other paperwork required.
How long does refinancing take?
This depends on the type of refinance. If you’re simply switching to a new product with your current lender without increasing your loan amount, this process can be completed in days. If you’re applying with a new lender or borrowing more with your current one, that process could take between 2-6 weeks depending on how complex your application is.
Thinking about cash out?
If you have available equity in your home, you may be borrow more with a cash-out refinance loan.
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