Mortgage Index – October 2008


Despite turmoil on financial markets during September, sales of mortgages across Australia recovered by 10.2% on the previous month’s low figure, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the states benefiting most from the recovery were Queensland, where mortgage sales increased by 17.9% and New South Wales which saw a 16.1% month on month growth. Western Australia and Victoria saw sales lift by 5.9% and 4.2% respectively.

The recovery can be partly attributed to August buyers holding off till September to confirm the first rate movement downwards, which had been the source of speculation for weeks.

While September sales were lower than for the same month last year by 13.9%, this is a less worrying figure than for August, which saw sales decline by 37% on August 2007.

Malcolm Watkins, Executive Director of AFG says: “We’d like to see two things happen to shore up this bounce. The first would be for the RBA to pass on a 0.5% rate cut next week.

“The second is for more initiatives like the recent $4bn investment by the RBA in AAArated Residential Mortgage-Backed Securities. Whilst it’s a good start to alleviate liquidity, the $4bn is less than two month’s worth of mortgage sales by our company – and we’re only one of many participants.

“It’s critical that the funding arm is available to smaller lenders, including non-bank lenders and building societies, whose ability to participate has been clamped off due to spiralling funding costs. This will encourage a wider choice of home loans and exert pressure on the majors to pass on more of any future rates cuts. Lack of competition ultimately means consumers will suffer at the expense of shareholders.”

AFG Mortgage Index shows that through all the volatility of the past 12 months, average mortgage sizes and Loan to Value ratios have hardly changed. On a national basis, the average new mortgage size is $337k, compared to $329k in September 2007 – a 2.4% increase. Mortgage sizes grew most in South Australia (by 8.3% from $253k to $274k) and New South Wales (by 4.7% from $382k to $400k), but held steady in most other states.

Meanwhile Loan to Value Ratios (LVRs), the value of a new loan expressed as a proportion of the value of a house, have also held steady – from 66.3% in September 2007 to 65.9% in September 2008. This suggests that most new buyers are not overstretching themselves to buy property. LVRs fell in Queensland, South Australia and Victoria but increased in WA by 10.9% and NSW by 4.3%.

Download – October Mortgage Index – National

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