A quarter of new home loans are high risk: What you've missed

By

Published on

One in five new mortgages high risk, Australia tops global property price growth and new money tool launched for under-21s. Here are five things you may have missed this week.

One in four new mortgages are risky, according to bank regulator

The latest lending figures show one in four (24%) home loans taken out in the December 2021 quarter had a debt-to-income ratio of six times or more - APRA's benchmark for 'high risk'. This represents a 17% increase in high-risk loans over the past 12 months.

new home loans at risk five things

The rise in risky mortgages is a flow-on effect of double-digit property price growth combined with wages that crept up by just 2.3% in 2021.

APRA has already stepped in to limit risky lending. In 2021 the regulator increased the banks' 'stress test', meaning lenders need to check how well a borrower would manage loan repayments assuming interest rates were three percentage points higher than the actual loan rate.

Industry experts believe APRA is unlikely to further increase the stress test rate given slower property price growth and rising expectations of a Reserve Bank rate hike.

If rates do head north, plenty of homeowners could experience serious mortgage stress.

Australia tops global property price growth

It's official. Australian home values grew at the fastest pace globally in 2021.

Knight Frank has released its Global House Price Index, with Australia taking out the dubious top spot as the country with the highest rate of annual property price growth.

House prices worldwide increased by 10.3% last year. Australia virtually lapped this figure, clocking up real (after inflation) price growth of 17.5%.

Turkey topped the league table of nominal (before inflation) price growth, with home values rising 59.6%. But after allowing for inflation of a jaw-dropping 36%, this figure dropped back to around 17%.

Only a handful of nations saw real property values decline in 2021, including Morocco (down 7.4%) and Brazil (4.3%).

Knight Frank Australia Head of Residential Research, Michelle Ciesielski believes we've reached a point where buyers have "become fatigued" after significant price growth, and she expects home values in Australia to climb by a more modest 8% in 2022.

Three in five under-21s want more from their money

Australians aged 15 to 21 - so-called Gen Z, are up for the challenge of making the most of their money.

A survey by money watchdog ASIC found 57% of young people want to learn more about investing, and one in two (54%) want to make their money work harder.

To support young people, ASIC has released a new resource called Get Moneysmart. It's a collection of videos, tools and calculators to help under-21s with everyday money decisions.

ASIC Commissioner Sean Hughes says, "Many young Australians are active consumers with multifaceted financial lives. They are handling money, setting savings goals, shopping online, using debit cards and making payments with their phones.

"Learning early how to manage money, make informed choices, save and plan for the future, helps young people be more prepared for significant financial decisions later in life, as well as guard against common pitfalls and unnecessary risks'.

Get Moneysmart can be accessed through the MoneySmart website.

Meta faces court for scam ads

Consumer watchdog - the ACCC, has kicked off court proceedings against Meta, the owner of Facebook, alleging it engaged in false, misleading or deceptive conduct by publishing scam advertisements on Facebook, which featured well-known Australians.

The ACCC alleges the ads, which promoted investment in cryptocurrency or dodgy money-making schemes, were likely to mislead Facebook users into believing the schemes were genuinely associated with celebrities that included businessman Dick Smith and TV presenter David Koch.

The schemes were in fact scams, and the celebs featured in the ads had never approved or endorsed them. That didn't stop people tipping money into the schemes. One consumer lost more than $650,000 in a scam falsely advertised as an investment opportunity on Facebook.

Fake celebrity endorsement scams are not new. In 2020, ASIC warned of fake endorsements featuring Waleed Aly, Celeste Barber, and Karl Stefanovic to promote crypto scams.

One in nine Aussies fall victim to fraud

The Australian Bureau of Statistics says 2.1 million Australians - one in nine of us, experienced personal fraud in 2020-21.

ABS Director of the National Centre for Crime and Justice Statistics, Will Milne says, "The results show an increase in the rate of personal fraud from 8.5% in 2014-15 to 11% in 2020-21."

This growth was driven by higher rates of card fraud and scams. But it turns out we're also a lot less likely to report certain types of fraud.

Milne notes, "The majority of those experiencing identity theft (93%) and card fraud (95%) reported the incident to an authority - most commonly a bank or financial institution."

By contrast only one in two people who fell victim to a scam last year lodged an official report. Computer repair scams are least likely to be reported. Fewer than one in four people who experienced these scams reported the incident.

Get stories like this in our newsletters.

Related Stories

A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.

Further Reading