Rising interest rates slash the loans Aussies are taking out to build their dream homes: Joust

Rising interest rates slash the loans Aussies are taking out to build their dream homes: Joust

With interest rates set to continue rising over the remainder of 2022, the impact of banks passing on rate rises can be seen in the types of loans Aussies are accessing. Leading Australian home loans marketplace Joust has already seen a trend in borrowers taking out significantly smaller loans for the purpose of building homes.

Loans accessed through Joust’s Instant Match platform are split into three categories: Buy, Build and Refinance. Between July 2022 and the same month in 2021 there was a significant dip in the average loan size accessed for the purpose of building homes, as Aussies look to tighten their wallets as the cost of living rises. By contrast however, the size of loans accessed for the purpose of refinancing have remained stable, and in some states including New South Wales, have actually increased in average value.

Joust’s Instant Match service allows Australians to save time by instantly accessing the top three (3) home loans suited to their needs (from thousands of different products). Through the Joust platform, customer submissions are immediately matched to lenders. The lender/s can then engage the customer to guide them through the home loan process.

As mentioned, comparing July 2022 to July 2021, Joust saw the average loan size accessed through Instant Match in the Build category falling by -28.05%, from $741,667 to $533,643. Loans in the Buy category fell slightly, by -6.81% (from $655,912 to $611,250), while loans in the Refinance category barely changed in average size, falling just -1.26% from $564,451 to $557,314.

Joust CEO Carl Hammerschmidt said that while multiple factors including government grants and excess savings saw borrowers taking out bigger loans for the purpose of building in 2021, one stood above the rest. “Record low interest rates meant that lenders were seeing interest not only from people looking to get into their first home, but others who could borrow to build their dream homes without having to worry much about the interest they would be paying back.

“As our data shows, interest for bigger loans in those categories has dropped off significantly in the last 12 months. At the same time, the needle on average loan amounts for the purpose of refinancing has moved very little, and Aussies remain keen to get the best deal. We anticipate the average size of loan in this refinance category to grow in the final quarter of 2022 and into 2023 as many come to the end of their fixed interest rate periods on home loans.” 

State By State Breakdown

Victoria and New South Wales, the two states with the most loans accessed through Instant Match, led the way in terms of falling loan sizes for the Build category. In Victoria loans in the Build category were down a whopping -39.13% – from $975,000 to $593,500. Average loan amounts in the category fell slightly less in NSW, dropping by -30.79% from $660,000 to $456,789.

Of all loans accessed on Joust’s Instant Match across all categories, some states saw an increase in average loan size between July 2021 and July 2022. South Australia had the biggest fall in average loan size, down from $592,333 to $402,786 – a 32% drop. Queensland’s average loan size fell by -6.02% from $469,511 to $441,258. Meanwhile Victoria had a -5.9% fall from $557,330 to $524,473.

On the other hand, the ACT saw average loan sizes on Instant Match increase by 15.81% from $450,000 to $521,167. Meanwhile, New South Wales also saw an uptick in average loan size, rising 13.8% from $728,216 to $828,693. These figures in New South Wales were driven by a significant 22.78% increase in average loan size for the Refinance category specifically, as households in Australia’s most populated state continue to look for a better deal on their home loans.