Mortgage Index – May 2012


Reduced demand for home loans in April shows why meaningful home loan rate reductions are necessary according to AFG, Australia’s largest mortgage broker. The AFG Mortgage Index shows that the overall volume of loans processed for borrowers decreased by 22.4%, from $2.9 billion in March to $2.2 billion in April 2012. AFG has approximately 10% of the total mortgage market (Source: ABS and AFG figures).

April is traditionally a quieter month for borrowers, usually because of Easter and school holidays, and this April’s demand was 7% higher than April 2011. But in the context of the previous much stronger two months, the weaker than expected April data exposed the vulnerability of the home loan market.

Other signs of consumer nervousness were revealed by the high proportion of fixed rate loans – 21% of all new loans. Down from a peak of 25.4% the previous month, this one in five proportion is still exceptional, revealing consumer concern about the future of rates.

The average new home loan size slipped back from over $400k for the previous two months to $383k – it’s lowest since February 2011 in another sign of a softening market.

Mark Hewitt, General Manager Sales and Operations of AFG says: ‘For some months we’ve been signaling the fragility of the home loan market, and April saw even more potential borrowers adopting a wait and see position. There has been so much negative commentary that a confidence boosting RBA rate cut had become urgently needed. Lenders must pass on a meaningful proportion of this cut if they wish to see demand for home loans improve significantly.’

Across the states, investment activity in NSW, already the highest in the country, soared even higher in April, with 44.4% of all new home loans in that state processed for investors – up from an already high 40.1% the month before. This compares to a national average of 35.2%. In WA, where investment had been lagging, the figure picked up from 26.6% in March to 29.8% in April.

Download – May Mortgage Index – National

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