Investor lending expected to keep growing in year ahead
Investor loans are growing at a substantially faster clip than owner-occupier loans, new data published in Money.com.au’s Mortgage Insights report shows.
According to the report, investor lending grew 22% annually in 2024, more than three times the rate of owner-occupier loans at 6% annually.
The average loan size reached new record highs by the end of 2024, averaging more than $642,000 for the year. A peak of slightly above $669,000 was recorded in the fourth quarter of 2024.
However, December proved a difficult month for the investor market, with loan numbers falling on a sequential basis for the first time since March 2023.
“Even though the number of new investment loans fell in the December quarter (after adjusting for normal seasonal patterns), the actual number of loans in the December 2024 quarter rose 13.3% to 50,573 – an increase of 5,939 loans compared to the same quarter in 2023,” the report said.
“This is still 7% below the record high of 54,100 loans in December 2021, but in dollar terms, the December 2024 quarter set a new record, thanks to a sharp rise in average loan values.”
Money.com.au property expert Mansour Soltani (pictured) said that house prices have increased equity for existing homeowners, which has allowed them to invest in additional properties.
Furthermore, market conditions are ripe for investor lending to keep going in 2025.
“With vacancy rates across capital cities at record lows, rental demand showing no signs of easing and population growth, we’re likely to see the investor market pull even further ahead in 2025 as market conditions shift in a downwards rate cycle,” said Soltani.
As the second-largest investor market in Australia, Queensland accounted for 23.8% of investor loans in 2024 – 1.7% more than Victoria as the largest market in Australia.
This is the first time Queensland has outpaced Victoria in investor loans for any given year on record, according to Money.com.au.
Victoria, however, saw the strongest growth in owner-occupier loans, increasing 10% year over year.
First-home buyer loans across all markets grew 6% year on year, with stronger growth anticipated for 2025.
“This segment of the market is expected to gain momentum in 2025 with rate cuts, government incentives & changes to serviceability rules around student loans,” Money.com.au said.
“Average loan amounts remained strong, even as house prices declined towards the end of 2024,” Money.com.au said. In the December quarter, the average new loan size for owner occupiers reached a record $665,978, up $51,744 from the previous year.
Source: Money.com.au Mortgage Insights report
Competition ramps up
The refinancing data points to an increasing rate of competition in the market.
Although refinancing deals were in decline for most of 2024 amid a lack of interest rate clarity, the trend saw a reversal in the December quarter, with the first quarterly growth in refinancing logged since peaking in 2023.
“This shows lenders are gradually offering more competitive rates on new loans compared to existing loans, and borrowers might be more motivated to refinance to take advantage of lower new loan rates,” said Money.com.au.
The gap between new and outstanding rates across both owner-occupier and investor segments is increasing, further highlighting the increasing competition among lenders.
“This shows lenders are gradually offering more competitive rates on new loans compared to existing loans, and borrowers might be more motivated to refinance to take advantage of lower new loan rates,” said Money.com.au.
“In owner occupier loans, larger lenders are one basis point more expensive on average for new loans, and one basis point cheaper for investor loans. This indicates a preference for owner occupier loans for smaller lenders,” said analysts.
Money.com.au collated data from the Reserve Bank of Australia and the Australian Bureau of Statistics to assemble the report.
