Australia in ‘mortgage recession’
THE number of mortgages taken out across the country fell for the second consecutive month in June, prompting a mortgage broker to declare the nation is in a “mortgage recession.”
Australian Finance Group (AFG) said the number of mortgages brokered by ts nationwide network in June was down 9.2 per cent from May. In the year to June mortgage volume was down 22 per cent, building on a 31.5 per cent fall in the May year.
AFG, which has 10 per cent of the broking market, said its data showed that mortgages sales nationally had now had two successive quarters of negative growth.
“We are calling it a mortgage recession,” AFG general manager of sales and operations Mark Hewitt said.
“Interest rates are higher and the cost of money has risen because of the sub-prime crisis in the US, which has spread to the rest of the world. “It means borrowers are really sitting on their hands and holding back in terms of major purchases like buying a home,” Mr Hewitt told AAP.
The 5939 mortgages AFG sold in June totalled $2 billion, down from $2.6 billion a year ago.
The Reserve Bank of Australia (RBA) has raised interest rates four times since August last year and the official rate now stands at 7.25 per cent, its highest in 12 years. At the same time, the commercial banks have raised their rates independently of the central bank, to offset their higher funding costs.
Mr Hewitt said, with the RBA less likely to raise rates again this year, he was hopeful that the decline in mortgage sales had bottomed out. “We’re hopeful it has bottomed out or very close to bottoming out,” he said.
Fewer but bigger
The AFG data showed that while volumes were down, the average mortgage size had increased by 7.5 per cent to $341,000 in June, from $317,000 a year ago.
Mr Hewitt said the overall rise in the average mortgage size reflected bigger loans at the well-heeled end of the mortgage market.
“The upper end of the market is proving the most resilient – that is, buyers with significant equity in their homes and investment properties,” he said.
“Many people who would normally be taking out smaller or medium size mortgages just can’t afford to.”
The biggest jump in the size of mortgages was in South Australia where they rose 13.5 per cent, followed by Queensland which was up 11.7 per cent, then New South Wales up 7.6 per cent, and Victoria up 6.1 per cent.
Of the 5939 mortgages taken out through AFG in June, 32.2 per cent were for property investors and 36.5 per cent were people refinancing their home loans.
The number of borrowers opting to fix their home loans fell to 11.5 per cent, from 20.4 per cent in June last year – indicating borrowers are increasingly confident the Reserve Bank is running out of steam on rate rises. Fixed rate loans peaked at 27.3 per cent of all new home loans in November last year.
Standard variable rate home loans remain the most popular option for borrowers, making up 40.8 per cent of the loans taken out in June.
Source: News.com.au
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