Mortgage Size Hits Record High But Investors Replaced By Owner Occupiers

The latest figures show that level of new mortgage activity is at a record high,  but investors are on the wane replaced by owner occupiersmortgage

Australia’s largest and most recently listed mortgage aggregator Australian Finance Group (AFG released its December 2015 quarter Mortgage Index, which now again includes figures at the state level.
The index, which is not seasonally adjusted, showed a solid 7 per cent increase in the volume of mortgages sold from the prior corresponding period, up from $12.9 billion in December 2014 to $13.8 billion last quarter.

AFG Mortgage Index

This was in spite of the investor share of the market continuing to decline, with this sector slinking back down to a 6 year low.

Investor loan volumes are expected to stabilise from here, with the impact of tighter lending rates for investors and tougher lending criteria now largely baked in.

investor market share

The investor segment of the market had clearly become overheated in 2013, contributing to slowing rental growth.

State versus state

At the state level, AFG recorded more than $5 billion of mortgages written in New South Wales for the third time, as the state saw mortgage volumes up 12 per cent from one year ago.

The data series added further weight to the suggestion that the Melbourne market may be set for a bright 2016, with mortgage volumes in Victoria up by nearly 18 per cent over the year in rising to a new high, despite the final quarter of the year being a short one due to the Christmas break.

Mortgage volumes written also increased by 13 per cent over the year in South Australia, but have declined in Western Australia (-10 per cent) and the Northern Territory (-21 per cent respectively).

Mortgage volumes

Mortgage sizes have soared

The average size of mortgage written continues to rise, up by 20 per cent over the past three years to a fresh all-time high of $476,479.

average size of mortgage

The average size of mortgage written in NSW increased to a new high of $583,708, with mortgage sizes also rising by around 7 per cent over the past year in Victoria, Queensland, and South Australia.

average size of mortgage

The wrap

While AFG’s index may be distorted by changes in market share, meaning that users should be wary of premature extrapolation, the figures do provide further evidence as to what to expect in the year ahead.

Markets will increasingly be driven forward by owner-occupiers rather than investors, while the market in Melbourne continues to defy…well, people like me, I suppose, who felt that the market have may peaked some years ago.

Overall, the property market seems to have calmed after the frenzy we saw around April and May last year, particularly in Sydney, and we can expect to see a more sustainable and balanced market going forward in 2016.

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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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