'Clear divide' in mortgage demand as sales head north

by Adam Smith03 Apr 2012

Mortgage sales are continuing to rebound following a weak start to the year, but the reasons behind the rise may vary from state to state.

AFG’s monthly Mortgage Index for March showed a 53% rise in mortgage volumes since January, when weak seasonal demand saw the company’s numbers dip. AFG settled more than $2.9bn in loans, up more than $100m from February and a spike of $1.1bn from January.

The aggregator said the rise showed a “clear divide” in the drivers of home loan demand between the East and West coasts. While investors dominated the market in New South Wales, accounting for two out of five new mortgages, they were less active in Victoria and Queensland, comprising slightly less than 40% and around 33%, respectively.

Investors were also quiet in WA, where loans for investment property have been decreasing since December 2011. Instead, the Western seaboard saw strong demand from first homebuyers, which accounted for 20% of the loans sold, far surpassing demand in NSW (13.4%) and Queensland (16%).

Overall the market was driven by investors and refinancers, which accounted for nearly three-quarters of the market nationally. AFG said the activity of investors was evident in other figures, as well.

“For the second month in a row, the average new home loan across Australia was above $400,000. However, LVRs remain steady, indicating that buyers are not taking on greater levels of debt to fund their purchases. This also reflects the large proportion of investors in the market, who typically use equity in one property to help pay for another,” the company said.

Investor-heavy NSW saw the largest average loan size, at $476,278, but did not clock the highest LVRs. Both Victoria and WA had higher average LVRs, at 69.1% and 69.8%, respectively.

Fixed rates also continued to prove popular, accounting for more than a quarter of the aggregator’s new loans. By comparison, fixed rates represented 6.6% of all new home loans in March 2011, and only 2.5% in March 2010.

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