Mortgage Index – September 2008


Minutes released by the RBA in early August, suggesting a rate cut would be made in September, encouraged property buyers to fence sit during August, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that mortgage sales fell by 20% in August as volumes slipped below $2 billion during the month for the first time since December 2006. This followed a relatively robust month for sales in July.

AFG has 10% of the national mortgage market and its figures are usually strongly indicative of definitive statistics produced six weeks later by the ABS.

In the past, sales of mortgages have traditionally increased by 10% – 12% in August compared to July. This year’s reversal goes against the seasonal trend.

Mark Hewitt, General Manager of Sales & Operations says: “Our members have been speaking to a lot of potential borrowers who were waiting to see what happens with rates. Yesterday’s cut is a welcome signal that the rate cycle is on the way down and it was great that the banks have passed the full reduction on. But borrowers have suffered death by a thousand cuts over the last 7 years of rate rises, and it will take more than one 25 basis point drop to see confidence return to property markets.

“What the RBA says about the future of rates will have a significant bearing on the next few months. Releasing its minutes is a positive in terms of keeping the public informed, however flagging future rate falls may contribute to a slower than hoped-for recovery due to the fence sitting mentality of investors and consumers.”

Across the country, New South Wales was the state most affected by the sales slide, with a 31% fall in sales for August compared to July. Western Australia saw sales fall by 19.9%, month on month, with Victoria recording a 18.4% fall. Queensland was least affected, with sales falling by 10.8%.

AFG Mortgage Index also illustrates the high expectations of consumers about future rate cuts, with only 4.9% of new mortgage buyers opting for fixed rate mortgages. This compares to a peak of 25.3% for fixed rate mortgages in February.

Property investors have remained constant, comprising 30% of new mortgage buyers, suggesting that long term confidence in the underlying value of property markets remains strong.

Download – September 2008 Mortgage Index – National