Mortgage demand continues GFC 'flatline'

by Mackenzie McCarty25 Oct 2012

Reserve Bank cuts to the cash rate are yet to stimulate significant mortgage demand, according to Veda Advantage.

The firm's consumer credit demand index found that mortgage enquiries have barely risen over the past year, with a 0.6% national increase in the September quarter when measured against the same period last year.

However, Veda acknowledges the large differences between states, with the Northern Territory seeing 21% growth in mortgage demand year-on-year, and Western Australians increasing their mortgage appetite by 11.5%.

In contrast, Veda noted year-on-year reductions in mortgage demand in Tasmania, South Australia, and Queensland of 6.3%, 6% and 2.4% respectively.

NSW managed a marginal increase of 0.9%, while Queensland demand remains the same as it was last year.

“Mortgage enquiries are a good indicator of home buyer demand and housing turnover with movements in mortgage enquiries tending to lead movements in house prices in six to nine months,” Veda Advantage general manager of consumer risk Angus Luffman says.

“We have now seen three quarters of relatively flat mortgage enquiries after two years of decline.  The pace of year-on-year decline in Australian house prices is now easing, and this is expected to continue, but the flat level of mortgage enquiries suggest house price growth will be kept in check over the coming months,” he said.

Overall credit demand contracted 1.4% according to Veda, with a continued drop in credit card applications partially offset by a rise in personal loans.

“While consumer credit demand showed slight growth in the June quarter as a result of RBA rate cuts and family assistance payments, the impact of the Federal Government’s cash handouts has now faded with consumer credit demand decreasing relatively quickly in the September quarter,” Luffman said.

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