Renovation Loans on the Rise: What We’re Seeing in the Market
One of the biggest trends I’m seeing right now in the Australian mortgage market is the sharp increase in renovation loans. Despite higher interest rates and ongoing inflation, homeowners are increasingly choosing to renovate rather than move and it’s showing in the numbers.
According to recent insights from Money.com.au, renovation loans are one of the fastest-growing segments in lending right now. They’re up 7% month-on-month and 9% year-on-year. With rising property prices, limited new housing supply, and the high cost of stamp duty, many Australians are opting to invest in their current homes rather than buy new ones.
Across the board, the average new loan size in Australia is now around $640,998. Owner-occupiers are borrowing on average $616,000, while investor loans are slightly higher at $627,000.
Even with the current economic climate, home loan activity continues to grow. We’ve seen a 7% rise in both monthly and annual loan volumes. However, these figures are still about 19% below where they were back in January 2022, when interest rates were at historic lows.
Investor lending is gaining momentum, especially in Western Australia, which recorded a 4.6% increase in July alone compared to the national average of 2.6%. WA also has one of the lowest average investor loan sizes in the country at $493,000, which is helping drive this demand.
First home buyers are also making a strong return to the market, now making up 31% of all owner-occupier loans. Their loan numbers are growing at a rate three times faster than the broader owner-occupier market. Victoria saw a 24% increase in first home buyer loans in July, while Queensland has enjoyed a 29% year-on-year boost.
One more key trend worth noting: the interest rate gap between variable and fixed loans for owner-occupiers has narrowed to under 0.2%. This could be a sign that lenders and borrowers alike are adjusting to a more stable rate environment.
If you’re considering a renovation, jumping into the property market for the first time, or looking to invest, now is a great time to have a conversation about your options. Seabreeze Finance is here to help you make confident and informed decisions for your next move.
