Australians are increasing the use of offset accounts and taking advantage of lower interest rates, paying down their $1.5 trillion worth of outstanding home mortgages.
As house prices are beginning to ease in capital cities and banks are setting the cost of borrowing outside of official interest rate movements, Australians are starting to become a lot smarter at how they pay down their mortgages.
In 2015, offset accounts grew faster than any other type of account and currently make up approximately 6.5 per cent of at-call transaction accounts.
Recent findings note that Australians debt to income ratio has deteriorated, from around 125 per cent in 2000 to more than 180 per cent in 2016. This is against a backdrop of substantially lower interest rates and the debt burden being disproportionately shared by higher income households who are better able to service debt.
In addition, recent research has found that two-thirds of home borrowing was covered by at least one month’s repayment buffer and about a third of the loans had a buffer greater than 12 months. This demonstrates as a strong indicator of the serviceability of loans and the capacity of borrowers to absorb any potential near term interest rate rises.