Flatlined mortgage demand could hold prices down

by Adam Smith30 Jan 2013


Flat mortgage enquiries could foreshadow subdued growth for house prices.
Veda's Quarterly Consumer Credit Demand Index has shown an overall year-on-year rise of 4% for credit demand. But the rise was driven by growth in personal loans, while credit card applications fell and mortgage enquiries flatlined.
While mortgage demand nationwide was flat, some regions of the country saw strong growth on the back of the resources boom. WA and NT both experienced a double-digit increase in mortgage demand, up 11.1% and 12.6%, respectively. SA saw reasonable growth at 4.8%, while Victoria remained relatively stable at 0.5%. New South Wales, Queensland and Tasmania all saw declines in mortgage enquiries, with Tasmania showing the worst performance, down 7.6%.
"Housing markets have, in the majority, been weak since late 2010. There is little evidence in the latest Veda data that the RBA rate cuts are having much effect in reigniting housing turnover with the level of mortgage applications staying flat since halting a two year decline in the March 2012 quarter. This generally soft mortgage applicant demand suggests that house price growth will be relatively subdued for at least the first half of 2013," Veda general manager of consumer risk Angus Luffman said.
The report comes on the heels of the  Dun & Bradstreet Consumer Credit Expectations Survey, which found only 18% of households expect to take on more debt for the March quarter. Luffman largely echoed Dun & Bradstreet's predictions. He said that, while personal loans showed strong growth, Australian households remained in a pattern of deleveraging.
"The continuing weakness in credit cards and mortgage enquiries still indicates that the attitude of consumers towards borrowing is still broadly one of caution – while there are encouraging signs, it’s still too early to call a sustained turnaround in the weak consumer credit environment of the past few years," he said.