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Mortgage market slumps

Mortgage market slumps

by Reporter 0 comments

The number of people seeking new home mortgages has collapsed as the three consecutive interest rate rises are finally being felt by the market.

According to the latest housing finance data released by the Australian Bureau of Statistics (ABS) yesterday, there was a 6.2 per cent drop in the number of approvals for new home loans.

The negative data has cast doubts over whether or not the Reserve Bank will hike interest rates again when they meet on February 2.

Real Estate Institute of Australia (REIA) president David Airey said the 4 per cent drop in the number of first home buyer commitments as a percentage of total was not unexpected.

“This is exactly what the REIA said would happen as the First Home Owners Grant Boost (FHOG Boost) was phased out and the Reserve Bank of Australia (RBA) began its series of interest rate increases,” Mr Airey said.

“First home owners have come down from a high of 28.5 per cent in May to the lowest since October 2008 when the Boost was introduced, with more decreases expected as the effects of the cessation of the Boost in December are realised.”

Mortgage Choice chief executive officer Michael Russell was not quite as glum about the results and said the drop in owner occupier activity was not necessarily a precursor for the year ahead.

“It is of course disappointing that the value of housing finance for owner occupiers fell. That is something we need to watch very closely in the coming months given the housing market is a major contributor to the health of the economy and to consumer confidence,” Mr Russell said.

“Australia is in a transition period between historically high demand for housing finance from first homebuyers and investors re-entering the market, while upgraders are taking their time and waiting to see where buyer competition, housing prices and interest rates are headed.

“The confidence of this group still needs work but our franchisees have been indicating for a few months now that they are seeing a noticeable increase in interest from upgraders.”

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Mortgage market slumps
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