Homeowners have got up to 45 months ahead on their mortgages through the pandemic
Australians have poured $50 billion extra into their home loan repayments over the past two years, getting up to 45 months ahead on their mortgages, according to new data.
Low interest rates, combined with lower spending and the inability to travel in the midst of the COVID-19 pandemic, have resulted in extra money for Australian households – money many Australians have directed to their home loans, according to a news.com.au report.
Stephen Koukoulas, managing director at Market Economics, told news.com.au that this was good news for people who owned homes prior to the pandemic. However, anyone who recently entered the property market could miss out on the advantages, he said.
“The pandemic changed a lot of things – we did tend to stay home, didn’t get to spend our money on luxurious things like holidays,” Koukoulas said. “I suspect a lot of people thought they were going to take advantage of the bad times to pay off their mortgage.”
By the end of 2021, the average Australian homeowner had overpaid 45 months’ worth of mortgage installments, according to data released Monday by the Australian Prudential Regulation Authority. By comparison, Australian households were 32 months ahead on average at the beginning of 2020.
In the same period of time, homeowners paid an extra $20,000 on average into their mortgage offset accounts, news.com.au reported.
People who took out their mortgage five or more years ago could benefit from the changes. Koukoulas told news.com.au that the extra payments could shave several years off their mortgage.
“You’ve still got to pay it off, but you’ve probably knocked off a good six or seven years,” he said. “If you took out a loan 10 or more years ago, the effect is probably even bigger.”
However, Koukoulas cautioned that homeowners could soon face interest-rate hikes.
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Current record-low rates make it easier than ever for homeowners to get ahead of mortgage repayments. But Koukoulas warned that there could be a rise in rates as early as the middle of this year.
“Middle of this year, or might be pushed back to the latter part of this year because of Omicron,” he told news.com.au. “Assuming we don’t get the Greek letters after Omicron, then the economy will bounce back, and we’ll see the RBA tighten rates a bit.”