Key Facts

  • The lowest data collection share since 2017 is currently noting a decline since 2021’s January due to a shift in the housing market frenzy.
  • For first-home buyers (FHB), only 29.7% of the new mortgages in September registered a Debt-to-Income (DTI) of 5. This decline comes from 41.5% in the same month the previous year.
  • Reserve Bank figures revealed that lowest shares of new mortgages for each borrower groups (e.g., investors, owner-occupiers) since data collection began.
  • The shares of new mortgages with a higher DTI of 7 fell to 5.2% in September, the lowest since the data collection started.
  • From 2022 to 2023, the average gross income for FHB rose by 4.7% while for other owner occupiers without investment property collateral it increased by 9.9%.
  • For FHB with a DTI of 5 and a Loan-to-Value ratio (LVR) of 80%, the share of lending in Q3, dropped to 8.4% from 12.6% in the same quarter of the previous year.
  • The Reserve Bank might introduce DTIs next year, with reporting and management systems in place for practical implementation by April 2024.

Article Summary

The share of new mortgages’ value relative to borrowers’ income is currently at its lowest since data collection was initiated in 2017. This trend began in early 2021 as the housing frenzy’s dynamics shifted. Furthermore, only around 29.7% of new mortgages in September 2023 had a debt-to-income ratio of five, a significant decrease from 41.5% in September 2022.

Additionally, the Reserve Bank’s data indicate that shares of new debt from different categories of borrowers, at a debt-to-income ratio of five, were at an all-time low. Furthermore, the share of mortgages with a high debt-to-income ratio of seven slumped to 5.2% in September, marking the lowest since data collection began. Both first time homeowners, and regular homeowners who don’t possess investment property saw increased income, with an average gross income rise from the previous year of 4.7% and 9.9% respectively.

In turn, the percentage of loans made to first-time buyers with a high debt-to-income and high loan-to-value ratio dropped to 8.4% in the third quarter of 2023, reduced from 12.6% in the same quarter of 2022. Lending to other home owners without investment collateral followed a similar trend, decreasing to 1.7% annually. Plans are underway for the Reserve Bank to introduce debt-to-income mixtures by next year, with the potential for practical implementation by April 2024.

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