Sharp plunge in home loan sizes: borrowers being forced to live within their means

Pressure is mounting in the Australian home loan market, following the most dramatic slide in average loan sizes since 2000.

Home loans analysis of data from the Australian Bureau of Statistics shows the size of home loans are falling across the country, with the national average home loan size now sitting at $357,200.

This equates to a slide of 4.08% in February 2016 compared to the previous month.

In fact, the national home loan size has declined by 7.71% in total in the past three months to February 2016, or $29,100 – which is the biggest three-month drop since May-July 2000, when the national average declined 7.74%.

It is also the first time the average loan size has dropped by more than 1% in three consecutive months.


South Australia was the only state to experience an increase in home loan sizes, with an uplift of 0.62% in February.

The sharpest decline was in New South Wales, where the average home loan size dropped by 5.75% in February.

It dropped 10.15%, or $45,500, in the last quarter – the biggest decline on record.

On this three-month timescale, home loan sizes are down in every state in Australia. Victoria and Queensland are down around 6%, while South Australia, Western Australia and Tasmania are down 2-3%.


Bessie Hassan, Money Expert at, says the impact of tougher bank lending policies introduced during mid-2015 is finally being felt.

“A cooling property market has led to shrinking maximum loan sizes following the Australian Prudential Regulatory Authority’s changes to investment lending,” says Ms Hassan.

“Banks are scrutinising new loan applications more closely, taking a tougher line when assessing borrowers income.”

This is thought to be a key reason the housing market has been decelerating. 

Latest figures from CoreLogic show the rate of house price growth is slowing year-on-year – March data reveals that median capital city prices rose just 0.2%

Data from credit reporting bureau Veda also shows that the demand for mortgages slowed significantly in the last quarter of 2015, with growth in mortgage applications decreasing by 2.9% compared to December quarter 2014.

This is the second quarterly decline in a row.

“The upshot of this is that the home loan market will be under pressure, and banks will be eager to secure new customers,” says Ms Hassan. “This could lead to an increase in housing affordability with interest rates declining even further.”

“We’re seeing variable home loan rates as low as 3.69% being offered by Mortgage House for 12 months – the lowest rates we’ve seen in years.

“This could be a great time for first time buyers to flex their muscles.

“First home buyers with a decent deposit could become a force to be reckoned with as low interest rates and cooling property prices boost their purchasing power.”


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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