Australians are milking record-low interest rates to smash down their home loan debts and pay off their mortgages in full. The long stretch of low interest rates since the global financial crisis is expected to continue well into 2015 and new results show Australians are maximising the good deals on offer.
Citibank’s annual 2014 financial survey found 25 per cent of Australians are mortgage-free and own their home outright compared to 2007 when it was just 16 per cent. However the number of Australians paying off a home loan has crept up from 38 per cent in 2007 to 41 per cent in 2014.
The bank’s head of banking solutions and wealth management, Dierdre Wroth, said Australians had remained focused since the GFC on their stashing cash and culling debt.
“They either accumulate cash or they start to deleverage their debt,’’ she said. “We’ve seen different aspects of people managing their debt, paying down the mortgage has become easier and rates are lower. They are very happy to put those funds into their mortgages rather than just put money into a bank account.”
The Reserve Bank of Australia has kept the cash rate on hold at 2.5 per cent since August 2013 and banks are continuing to offer record-low interest rates below five per cent. RBA figures show Australians are now more than two years’ ahead on their mortgage repayments.
The research also showed the number of people renting has dropped, falling from 36 per cent in 2007 to 24 per cent. HSBC chief economist Paul Bloxham said the ageing population had also contributed to an increasing number of older Australians paying off their loans in full.
“Since the global financial crisis households have been paying down their mortgages faster on average than is required,’’ he said. “They have built up more of a buffer and that would imply there are more households that are paying off their mortgages outright.’’
Figures by one of the nation’s largest mortgage broking companies Australian Finance Group, shows that the average size of new mortgages in December was $444,000.
In NSW the average size was the highest at $544,000, followed by Victoria ($439,000), WA ($428,000), NT ($375,000), Qld ($374,000) and SA ($349,000).