Leslie Massey
Australia has seen a significant shift in housing tenure over the past few decades, with a growing number of people opting for home loans and mortgages. In 2021, Australia had approximately 9.8 million households, with more than a third (around 35%) of these homes owned with a mortgage. This trend is even more pronounced among younger age groups, with a decline in homeownership rates for those aged 25-34, 35-44, and 45-54. The average home loan size in Australia was $580,000 as of the June 2023 quarter, but this varies across different states and territories. While the dream of homeownership persists, rising interest rates and housing costs present challenges for many Australians, leading to an increase in renting and variable mortgage rates.
| Characteristics | Values |
|---|---|
| Total number of households in Australia | 9.8 million |
| Number of households with a mortgage | 3.3 million |
| Percentage of households with a mortgage | 35% |
| Average home loan size | $580,000 |
| Average housing cost for homeowners with a home loan | $493 per week |
| Number of households that are rented | 2.8 million |
| Percentage of households that are rented | 30% |
| Number of households owned outright | 2.9 million-6.2 million |
| Percentage of households owned outright | 31% |
| Percentage of households with owners aged 25-34 | 43% |
| Percentage of households with owners aged 35-44 | 57% |
| Percentage of households with owners aged 45-54 | 63% |
| Percentage of households with owners aged 65+ | 79.4% |
| State/Territory with the highest proportion of people living in disadvantaged households | Northern Territory (30.3%) |
| State/Territory with the lowest proportion of people living in disadvantaged households | Australian Capital Territory (9.8%) |
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What You'll Learn
Home ownership rates
The decline in home ownership rates is particularly noticeable among younger age groups. In 2021, the home ownership rate for 30–34-year-olds was 50%, a decrease of 14 percentage points from 1971. Similarly, for 25–29-year-olds, the rate dropped from 50% in 1971 to 36% in 2021. This downward trend is also observed in older age groups, with a decrease of 8 percentage points for the 50–54 age group since 1996.
The shift in housing tenure is influenced by various factors, including income levels and government initiatives. Income plays a significant role in an individual's ability to purchase a home, with higher-income earners potentially having an easier time securing mortgages or buying properties outright. Additionally, the Australian government offers financial support to assist first-time home buyers, low-income households, First Nations people, and vulnerable populations. These initiatives include the First Home Owner Grant Scheme, First Home Super Saver Scheme, and Home Guarantee Scheme, which aim to improve access to home ownership for eligible individuals.
While the number of homes owned with or without a mortgage has remained relatively stable since 1996, the share of rental properties has increased. In 2021, about 30% of households were rented, and this number is expected to grow, especially with the impact of the pandemic. During the pandemic, fixed-home loans became more popular due to low-interest rates, but as interest rates rose in 2022, many of these fixed terms expired and transitioned to variable rates.
The average home loan size in Australia also varies by state and territory, with housing markets in cities like Sydney being generally more expensive. The average interest rate for owner-occupied variable-rate home loans also influences the overall cost of owning a home. As a result of these factors, home ownership in Australia is becoming more challenging, and individuals are making significant financial commitments to secure their homes.
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Average mortgage size
As of February 2024, the national average mortgage size in Australia was $598,624, a decrease from the all-time high of $624,383 in December 2023. However, mortgage sizes vary significantly across the country, with the average loan size depending on the state or territory. For instance, New South Wales (NSW) has the highest average mortgage amount at $721,599, while the Australian Capital Territory (ACT) has an average mortgage amount of $628,411. The Northern Territory has the lowest average loan size at $437,427.
Several factors influence the average mortgage size in Australia. One crucial factor is the location of the property, as each state or territory has a distinct property market. For example, South Australia experienced a significant increase in mortgage prices, with a $74,337 average rise compared to the previous year. Another factor is whether the loan is for an investor or owner-occupier, with owner-occupiers benefiting from lower interest rates. The type of property, whether it is an existing or new build, also plays a role in determining average mortgage sizes.
The average interest rate on an owner-occupier home loan in Australia is 6.3% per annum, according to the RBA Owner-occupied Variable Housing Rate data. This rate is used to calculate average mortgage repayments, assuming a 30-year loan term. However, it is important to note that these averages do not take into account extra repayments, promotional interest rates, or refinancing options, which can significantly impact the overall cost of a mortgage.
The average mortgage repayment amount in Australia is $3,863 per month, based on a 30-year loan term and the current average interest rate of 6.27%. According to estimates, Australians typically take between 60 and 65 years to pay off their mortgages. However, this timeline can vary based on several factors, including the age of the buyer, whether the property is jointly purchased, the length of the loan period, and any additional repayments made.
In conclusion, while the average mortgage size in Australia is just under $600,000, this figure varies considerably across states and territories. The location of the property, type of loan, and property type all influence average mortgage sizes. Additionally, with the average interest rate at 6.27%, Australians can expect to pay around $3,863 per month over a 30-year loan term.
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Variable vs. fixed-rate mortgages
In Australia, there are 9.8 million households, and of these, 35% are owned with a mortgage. This equates to around 3.3 million homes.
When it comes to taking out a mortgage, there are two types of home loans: a fixed-rate loan or a variable-rate loan. A fixed-rate mortgage allows you to lock in a set interest rate for a certain period, usually between one and five years. This means you can plan for the future, knowing that your repayments will remain the same during that time. However, once this fixed period ends, your loan will revert to a variable rate. There may also be penalties and fees associated with fixed-rate mortgages, such as break or exit fees, and you may not benefit if interest rates fall.
On the other hand, a variable-rate mortgage means your interest rate can rise or fall throughout the term of the loan. The interest rate offered by the bank is influenced by factors such as the official cash rate set by the Reserve Bank of Australia and the lender's funding costs. A variable-rate loan can be beneficial if interest rates fall, as you can continue to make the same repayments and pay off your loan sooner. However, if interest rates rise, your repayments will also increase. Variable-rate loans often provide more flexibility, with the ability to make extra repayments and unlimited redraws. They also make it easier to switch loans or loan types.
Both options have their advantages and disadvantages, and the best choice for you will depend on your personal and financial circumstances. If you are unsure, you can also consider a split loan, which includes both variable and fixed-rate components. This gives you the certainty of a fixed rate on part of your loan, along with the flexibility to make extra repayments on the variable portion.
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Household income
Income levels play a significant role in an individual's ability to obtain a mortgage and purchase a home. According to census data, among those with a weekly income of $4,000 or more, 875,176 individuals lived in homes owned outright, while 2.4 million had a mortgage. This higher-income bracket demonstrates the financial capacity to either own a home without a mortgage or manage the financial commitments associated with a mortgage.
For first-time homebuyers, low-income households, First Nations people, and vulnerable populations, the Australian government provides financial support to assist with home purchases. Programs such as the First Home Owner Grant Scheme, First Home Super Saver Scheme, and Home Guarantee Scheme offer various forms of assistance to eligible individuals. These programs aim to improve access to home ownership and address barriers faced by specific demographics.
Income dynamics also come into play when examining the broader trends in the housing market. Over the years, there has been a notable shift in tenure types, with an increase in renting and mortgaged homes, while outright ownership has declined. This shift can be attributed to factors such as climbing property prices, influencing the decisions of both renters and owner-occupiers.
Additionally, the distribution of household income across different states and territories in Australia impacts the housing landscape. The Northern Territory has the highest proportion of relatively disadvantaged households (30.3%), while the Australian Capital Territory has the lowest (9.8%). These disparities can influence the ability to obtain a mortgage and contribute to varying homeownership rates across the country.
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Rental households
There are several factors contributing to the rise in rental households. One key factor is the increasing difficulty of achieving homeownership in Australia. Despite government initiatives to support first-home buyers, such as the First Home Owner Grant Scheme and the First Home Super Saver Scheme, the dream of owning a home is becoming increasingly out of reach for many Australians. This is especially true for younger generations, who may struggle to save for a deposit while also facing rising housing costs and larger mortgages.
The shift towards renting is also influenced by the changing nature of the housing market. Between 1996 and 2021, there was a notable decrease in the proportion of households occupying freestanding houses, while the share of apartments increased. This shift may indicate that buyers are having to make greater sacrifices to enter the property market, opting for apartments over freestanding houses. Additionally, the role of real estate agents in the rental market has become more prominent, with two-thirds of rental properties being rented through agents in 2021, compared to half in 2006.
The increase in rental households has had a significant impact on the availability of public housing. According to Better Renting, an advocacy group, there has been a concerning decrease of more than 25,000 in public housing. This decrease has led to a shortage of affordable housing options for those who are struggling to make ends meet, with some individuals resorting to couch-surfing, sleeping in their cars, or skipping meals to afford rent.
While the rise in rental households presents challenges, it is important to note that renting can offer flexibility and accessibility for some individuals. For those who are unable to commit to a mortgage or are seeking temporary accommodation, renting can be a viable option. Additionally, renting can provide an opportunity for individuals to save for a future home purchase, particularly with the support of initiatives like the First Home Super Saver Scheme.
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Frequently asked questions
As of 2021, 9.8 million people in Australia are paying off a mortgage. This is a notable increase from 1996 when 27.5% of homeowners had mortgages.
As of 2021, 35% of Australians own their homes with a mortgage. This is a slight increase from 2016 when the figure was 34.5%.
As of 2021, 6.2 million people in Australia own their homes outright. This is a decrease from 1991 when the figure was 41%.
As of 2021, 31% of Australians own their homes outright. This is a slight decrease from 2016 when the figure was 30%.
