Property prices might be dropping in some areas, but apparently home buyers are now borrowing more against their property value. According to a study by mortgage broker Australian Finance Group, buyers are borrowing 71.5 percent of the home’s value, more than 5 points higher than in January 2005. Clearly people aren’t too concerned about the property market crashing in a heap:
“What we’re seeing are owner-occupiers utilising the equity growth in their existing residences as a deposit to upgrade to new premises. If this continues we could well say that these may be the first green shoots of a future housing recovery in several eastern states.”
– Australian Finance Group executive director Malcolm Watkins (in The Age)
What’s also interesting is that a Wizard Home Loans survey found that four out of five borrowers expect a rise in interest rates this year, and about half of them have budgeted for a rise of up to 0.5 points. That’s a good start, though there are concerns as to what could happen if rates increase by a point or two.