New APRA data beats mortgage records

by AB26 Feb 2014
The Australian Prudential Regulations Authority has released new data which indicates the prevalence of investors and subsequently interest-only mortgages within the market is rising at record levels.

APRA’S domestic Australian Authorised Deposit-taking Institutions’ property exposure data for the December 2013 quarter shows 34.6% of all mortgagees had a loan with an offset facility – a record high since the archives began in March 2008.

“The rising proportion of loans with an offset facility indicates to me that many mortgagees are utilising these facilities to reduce their mortgage liability whilst still having access to those funds,” said Cameron Kusher, senior research analyst at RP Data.

This is supported by recent RBA data which indicates the typical mortgagee is around 21 months ahead in their mortgage repayments, he said.

The APRA data also shows a record high 35% of all outstanding loans are interest-only mortgages. This is up from 34.6% at the end of the September 2013 quarter and 33.8% in December 2012.

The average amount outstanding for a residential loan was recorded at $233,500 at the end of December 2013.  The figure is also a record high, up from $231,700 at the end of September 2013 and $228,300 at the end of December 2013. 

But Kusher said what is “concerning” is the typical amount outstanding for interest-only mortgages is $295,300, up from $294,300 at the end of the previous quarter and $294,100 at the end of 2012. 

“Those mortgagees that are not reducing their principal have much higher overall debt levels than those who are,” he said.

Over the quarter, the proportion of interest-only mortgages hit a record high of 38.8%, up from 37.2% the previous quarter and 35.0% at the same time the previous year. 

“Of course, the risks are that these buyers stretch themselves too far and when mortgage rates begin to be normalised they have an increased risk of default,” said Kusher.

The data shows the prevalence of investors and subsequently interest-only mortgages within the market is rising. 

“This is not without risks particularly if housing market conditions or monetary policy settings shift rapidly,” Kusher said.

“Should interest rates rise rapidly in the future, the interest proportion of mortgage repayments would also quickly rise with most mortgagees on variable rate mortgages.”