Mortgage Index – August 2014


Demand for mortgages from brokers surged to an all-time high last month in Victoria according to AFG, Australia’s largest mortgage broker. The AFG Mortgage Index, published today, shows that the company processed $1,09 billion in home loans for Victoria in July – the first time the company has ever processed over $1 billion for any state outside NSW.

Demand for home loans in Victoria was led by borrowers seeking to invest (34.9%) refinance (34.4%) and upgrade (21.1%). Only 9.6% of new loans were for first home buyers, a decline from the previous month (11.3%).

While demand for home loans in Victoria was a massive 44% higher than in July 2013, other states in Australia also showed strong growth last month. Demand in WA was 21.2% higher than in July 2013, NSW 12.8%, QLD 11.6%, and SA 3.7%. Overall AFG processed $4.1 billion in mortgages in July – its second biggest month since the record $4.2 billion recorded in May 2014, and 21% more than in July 2013.

Mark Hewitt, General Manager of Sales and Operations says: ‘Victoria has traditionally been the state with the lowest use of brokers, but this is starting to change. With increasing competitiveness and complexity in the mortgage market, we are seeing a marked shift in borrowers using brokers to help them find the best deal. The resilience of the Victorian market, defying concerns about high-rise over-supply, is another factor underpinning mortgage demand there.’

The AFG Mortgage Index shows the overall proportion of loans arranged for investors softened in July to 38.0%, down from the record high of 40% recorded in May 2014. Consistent with this, the average loan to value ratio (LVR), a loan expressed as a proportion of the value of a property, rose to an average 68.2% from 66.6% in June. Investors typically use equity in existing property to fund their investments, thereby reducing overall LVRs. Victoria’s LVR of 71.2%, like WA’s of 71.5%, are higher than the national average, indicating lower levels of investors, compared with other types of borrowers in those states. 24% of borrowers last month chose fixed rate loans, consistent with previous months.

There was a sharp rise in introductory mortgages, from 7.3% in June to 9.6% in July, as a number of lenders offered attractive start-up deals. These types of loans are traditionally attractive to first home buyers, however last month saw other types of borrowers start to take advantage of the offers.