Borrowers are taking advantage of low interest rates to salt away funds in mortgage offset accounts faster than ever. The offset buffer is now close to 10 per cent of total mortgage outstandings.
According to the latest APRA data, funds in mortgage offset accounts grew by 7.2 per cent to A$174 billion over the 12 months to March.
APRA said the increase was likely due to falling home loan interest rates, which enabled borrowers to build bigger buffers.
Offset balances represent 9.1 per cent of total loans to households secured by property - A$1.25 trillion of owner occupier loans and $667 billion of investor loans.
The APRA data also shows that the majority of outstanding home loans are “well covered by collateral”. At March 31, 79.2 per cent of all outstanding mortgages had LVRs below 80 per cent.
Only 4.8 per cent of mortgages had LVRs of 90 per cent or more.
The big banks reported in their half-year results that between 66 and 82 per cent of their customers are ahead with mortgage repayments.
ANZ reported that 76 per cent of home loan borrowers are ahead with their repayments – up from 71 per cent a year earlier. Twenty-eight per cent of borrowers are more than two years ahead. The bank has a total offset balance of $28 billion.
Commonwealth Bank said 82 per cent of borrowers are ahead with repayments, with an average of 35 payments in advance.
NAB has an offset balance of $30 billion, with 66 per cent of borrowers ahead with their repayments. The average is 36.3 monthly payments in advance.
Westpac said that 70 per cent of customers are ahead on repayments – up from 69 per cent a year earlier. Forty-one per cent are more than three months ahead. Over the 12 months to March Westpac’s total offset balance has grown from $40 billion to $42 billion.