Aussies furiously repaying mortgages

Data from Firstmac shows that there was a sharp rise in the proportion of the non-bank lenders’ customers who chose to make additional mortgage repayments in the September quarter. CFO James Austin says this suggests that consumers are being cautious in the current economic environment and opting to reduce their mortgage rather than spend their money on goods and services:

Voluntary payments into mortgages more than doubled in July, August and September from the previous 12 months, data from non-bank lender Firstmac shows…

Firstmac’s analysis of its $5.8 billion direct retail mortgage book shows the level of additional payments made by borrowers jumped to an average 10.2 per cent of the portfolio in the past three months, compared with the monthly average payment of 4.8 per cent last year…

“There‚Äôs obviously a lot of money flowing through the economy and people are choosing to save that money,” Firstmac chief financial officer James Austin told The Australian Financial Review.

“Paying down the mortgage is another form of saving.”

The macro data supports Firstmac’s observations.

Australia’s household savings rate ballooned to a 50-year high in the June quarter:

Personal finance commitments have collapsed:

And most tellingly, growth in the stock of mortgage credit outstanding (mortgage growth) has flatlined as new mortgage finance commitments (housing finance growth) has soared:

This should be viewed as a harbinger for the Morrison Government’s tax cuts, with Aussie households likely to save the additional disposable income rather than saving it.

Accordingly, tax cuts are unlikely to have the stimulatory effect to the economy that the Government is hoping for.

Leith van Onselen
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Comments

  1. Time to repay the debt, you have left it way too late
    figures from around the ridges show that fro every job opening there are 110 applicants, on average
    time to tap the bank of MAD
    hold, on they are in deep poo as well.???
    HAve you had a call from the bank yet re the repayment freeze??
    Just in time for Xmas. Go Santa.

  2. Worth noting that as the FirstMac CFO explained “Paying down the mortgage is another form of saving”.
    And the household savings ratio reflects this. Paying off the principal of a loan is considered “savings”. Significant delevraging underway

    • Jumping jack flash

      This.
      I’m not 100% sure but in some cases debt is perversely considered as savings. Perhaps in the case of offset accounts? I don’t really know though. I seem to recall there was some discussion about the legitimacy of doing this a few years ago.

      Our esteemed leaders will do anything to paint a picture that is far rosier than the poo that it is actually painted with.

    • Jumping jack flash

      Yes. I was thinking UBI or -ve interest rates, but you’re right.
      There’s nothing better than bailing out their failed New Economy experiment using the people’s own money.

  3. Jumping jack flash

    Oh dear! Oh dear, oh dear!
    Have they given up?
    Have they stopped caring?

    The debt needs to GROW, and at the correct rate. If the debt doesn’t grow at the correct rate, the New Economy – which is basically a big pile of [someone else’s] debt, cannot grow either. In fact it starts shrinking.

    On the other hand, maybe they have finally woken up to what is actually going on? Maybe they’re not trying to grow the debt? Maybe they’ve realised that a $100 billion yearly interest bill for the people to pay is big enough.
    Maybe there’s *gasp* too much risk to grow the debt any bigger?

    Of course, the amount of risk is unimaginably high, they just chose to ignore it for 20 years.

    But if they start uttering the R-word, first in hoarse whispers, then gradually louder, we all know what will happen shortly afterwards…. interest rates going up! Look out!

  4. Understandable, but I’d prefer the cash.
    For example, if you had a mortgage of 100K outstanding, and 100K in cash, my preference would be to leave the balance as is at 2ish % and have that 100k cash up my sleeve for whatever happens next e.g. job market & lending conditions.

    • PaperRooDogMEMBER

      Exactly, if there is a risk of loosing your job (which we will ALL have for the next few years) it’s probably not wise to give extra money to your bank (at these low rates for a few years) only to have them foreclose on you anyway, best to put in somewhere out of their reach until things normalise or at least our future (turning Japanese only without a booming world economy?) is clear

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