Mortgage ‘recession’ claims

The Australian mortgage industry is in a ‘recession’, according to one of Australia’s largest mortgage brokers.

Mortgage finance wholesaler Australian Finance Group (AFG) today released its Mortgage Index showing that national mortgage sales have experienced two successive quarters of negative growth.

If a country undergoes two successive quarters of decline in its Gross Domestic Product economists will often use this to determine it is in recession.

AFG said that the national sales of mortgages in June of this year have declined 9.2 per cent on the figures for May, and 22 per cent on June last year.

However, at the same time the average mortgage size has increased by around 7.5 per cent, AFG said.

“At first glance it may seem strange for an industry hit by rate rises to see average mortgage sizes increasing,” AFG general manager of sales and operations Mark Hewitt said.

“But what these figures show us is that many people who would normally be taking out smaller or medium-size mortgages just can’t afford to,” he said.

Buyers with significant equity in their homes or investment properties are proving the most resilient to the tougher economic climate, he added.

Despite this, buyers are not feeling too pessimistic.

AFG noted that the proportion of buyers taking out fixed rate loans has fallen to 11.5 per cent from a high of over 23 per cent in November of last year.

AFG believes that this fall indicates that the vast majority of new buyers think that rates are likely to stay steady or fall.