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How much will your home really cost? Sitting down? Good. We all know we pay interest on home loans, but looking at the total paid out over the life of a loan can be like looking into the sun. Brace yourself, because Canstar have put on their sunnies and crunched the numbers to calculate home buyers taking out an average owner-occupier loan in Australia today – $584,907 – will repay $1.38m over the course of a 30-year loan. That’s a slightly stomach-churning $799,060 in interest1. While shocking, looking at these long-term figures can actually help underline the big impact small strategies can have over the life of a loan to substantially cut that interest bill. For instance, Canstar also calculated that just switching to fortnightly rather than monthly payments could shave almost $200,000 and six years off the same 30-year loan.
Silver linings And there’s more positive news. A shorter-term analysis found that during the past 10 years, rising property values have outstripped the total cost of interest payments on the average home in most Australian States, putting buyers ahead. However, the key word here is most. While, on the whole, people who climbed onto the property ladder in 2013 were in the black, notable exceptions were buyers in Western Australia and the Northern Territory. 1 C anstar analysis is based on the Reserve Bank of Australia’s reported average standard variable interest rate over the past 30 years of 6.88 per.
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In WA, relatively modest price growth of 1.6 per cent a year over the past decade has left more recent borrowers in negative territory. Based on the average home price in 2013 of $572,700, borrowers who bought with a 20 per cent deposit would have paid $191,258 in interest over the decade to 2023. During the same period, their property only rose in value by $98,519, leaving a $92,739 shortfall between loan costs and valuation gains. That on-paper loss was even greater in the NT, where an overall fall in valuations added to interest payments to leave the average buyer $193,122 worse off over 10 years (see table). It was a very different story in chart-topping New South Wales. Back in 2013 the average property price in NSW was almost level-pegging with WA’s, at $580,000. But while values in the west languished, over the decade east-coast properties rocketed up by $508,740 to almost $1.1m, leaving average homeowners with gains of $315,044 after deducting interest costs. It’s worth noting the recent sluggish performances of WA and the NT may be linked to over-performing in the preceding decade. From 2002-2012, Perth and Darwin posted the sharpest rise in house prices across the country, and were the only two capitals to post price growth of more than 100 per cent, according to CoreLogic’s Home Values Index 2.
2 L awless T, The long game … 30 years of housing values, CoreLogic Property Pulse, 29 August 2022.
