Small Loans Trending More Than Home Loans


Recently, Australians have chosen not to spend so much money on home loans, but rather on small loans. They prefer retail and cheaper things, such as cars, motorbikes, fridges, TVs and other electronics, because homes became unaffordable. However, Australians are not eager to give up on borrowing, just that they no longer want a home loan.

What Happened to Home Loans?

Statistics show that the interest of Australians regarding home loans decreased dramatically last year, and continues to decline now. This happened especially because house prices are extremely high in the last period so that people can no longer afford one. Many young adults who do not have their own home do not even consider the possibility of borrowing money for one.

According to a survey of property markets, Sydney and Melbourne have some of the most expensive housing markets in the whole world, assuring themselves a place in the top 4.

The price of income ratio has also suffered a dramatical change during 2015, as this ratio knew the biggest increase in the last 12 years. In these conditions, it’s hard to believe than an Australian with a middle income will be prone to buy a house for which he has to pay even more than $1 million, in Sydney or Melbourne.

Small Loans Are Getting More and More Popular

Even though Australians are not looking at home loans anymore, they still are attracted by small loans.

Some of the top markets when it comes to small loans are electronics, motorbikes and, cars. In fact, even though the rate of home loans has dropped so badly recently, recent research reveals that Australians are willing to buy themselves new cars, even luxurious cars.

Statistics show that car companies had a huge profit in 2015, as this was a record year for new cars sales. The data is clear: during 2015, Australians purchased 1,155,408 new cars. What is more surprising is the fact that many prefer big or luxurious cars, as SUVs recorded more sales than small vehicles. In fact, when compared to 2014, the demand for SUVs has seen a growth of 15.9%.

What is the explanation for this? Experts consider that this situation can be regarded as a ‘lipstick effect’. This is a phenomenon which usually occurs during an economic crisis and can be described as a reaction to this situation. People can no longer afford extremely expensive things, such as houses, but they don’t want to give up to their luxury addiction. They are just looking for cheaper luxury goods.

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