Low rates spur bigger mortgages

Low rates spur bigger mortgages

30 May 2013 by Staff Reporter 0 comments

Staff Reporter

Australians are more comfortable with the current low interest rate climate and are applying for larger mortgages, new research has found.

According to financial comparison website RateCity, despite affordability improving for first-time buyers, they are taking on larger mortgages instead of saving money.

RateCity spokeswoman Michelle Hutchison is concerned that first home buyers may not be able to service bigger mortgages when the market shifts.

"It's easy to feel comfortable with a bigger mortgage when interest rates are low," Ms Hutchison warned in the statement.

"But taking on more debt will end up escalating the cost when interest rates rise, and borrowers can get into financial trouble if they are not careful."

According to RateCity, just a one percentage point rise in the average standard variable rate to 6.69 per cent would cost an extra $195 per month on a $300,000 mortgage, but $259 per month more on a $400,000 loan.

Recent Australian Bureau of Statistics (ABS) data showed the average loan size of first-time buyers was $291,200 in March 2013, compared with $281,800 in March 2012.

Staff Reporter

Australians are more comfortable with the current low interest rate climate and are applying for larger mortgages, new research has found.

According to financial comparison website RateCity, despite affordability improving for first-time buyers, they are taking on larger mortgages instead of saving money.

RateCity spokeswoman Michelle Hutchison is concerned that first home buyers may not be able to service bigger mortgages when the market shifts.

"It's easy to feel comfortable with a bigger mortgage when interest rates are low," Ms Hutchison warned in the statement.

"But taking on more debt will end up escalating the cost when interest rates rise, and borrowers can get into financial trouble if they are not careful."

According to RateCity, just a one percentage point rise in the average standard variable rate to 6.69 per cent would cost an extra $195 per month on a $300,000 mortgage, but $259 per month more on a $400,000 loan.

Recent Australian Bureau of Statistics (ABS) data showed the average loan size of first-time buyers was $291,200 in March 2013, compared with $281,800 in March 2012.

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