A decade longer, $275,000 dearer: The trade-off facing Aussie home buyers
A new way into the housing market is gaining traction, but it comes with a hefty long-term cost.
In Australia, more lenders are offering 40-year home loans, a decade longer than the standard 30-year term. This trend has emerged as house prices have reached historic highs, and some Australians are seeking ways to make homeownership more affordable. Sally Tindall, data insights director at financial comparison site Canstar, notes that many of these 40-year mortgages target younger people and first-home buyers.
By extending loan terms, borrowers can reduce their monthly repayments and increase the amount they can borrow. However, experts warn that these extended loans come with significant downsides. Over the life of a $600,000 mortgage, an additional decade of repayments could result in nearly $275,000 in extra interest. Experts advise borrowers to consider whether the size of the loan is appropriate for their financial situation, as refinancing may be challenging with limited lenders and high-risk profiles.
While some lenders anticipate offering 40-year loans to meet customer demand, Australian Prudential Regulation Authority (APRA) sees them as risky due to their long-term nature. Tindall believes that longer loan terms won't solve Australia's housing affordability issue, and more focus should be placed on increasing housing supply and lowering prices.
Written by urgent.news from SBS News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
