Mortgage Demand At Record Levels

By Pete Wargent on 7 Aug 2014
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Australia’s largest mortgage aggregator Australian Finance Group (AFG) has released its latest mortgage index.

According to the data, the AFG wrote the second largest balance of mortgages in its history at $4,122 million, just shy of the all-time record of $4,208 million written back in May.

These figures can bounce around a bit by month, but can also act as a fairly useful indicator as to what is going on in the market. 

The figures suggests that the property market in aggregate is red hot, but as we shall see, all markets are not performing equally.

Mortgage Demand

This is another huge result for July, then, as total mortgage demand is 21 per cent higher than it was a year ago.

Note that the figures are not seasonally adjusted, hence the dip around Christmas time. 

The below chart, which shows mortgage demand split out by state, reveals the first two major points of interest. 

Firstly, the sizeable increase in average mortgage size in New South Wales over the past year.

“The figures suggests that the property market in aggregate is red hot, but… all markets are not performing equally.”

And secondly, the enormous increase in average mortgage size in Victoria this month.

Clearly, these are monthly figures that are not meant to be taken too literally in isolation, but this is still a monster result in Victoria, and it suggests that buyers are still running rampant, regardless of fundamentals. 

The Number Of Mortgages Written By State

In terms of the number of mortgages written by state, there were significant increases in Western Australia and New South Wales, but Victoria is again the clear standout.

Over the past year, the number of mortgages written by AFG was flat for Queensland and fell in South Australia. 

There was a very significant 19 per cent increase in Victoria, while mortgages written in Western Australia were up 11 percent and those written in New South Wales were up a very solid 9 per cent.  

A 1 per cent decline was recorded by AFG for South Australia. 

The Value Of Mortgages Written By State

Moving on to look at mortgages written by state, the thing to note is again the huge ramp up in Victoria after the seasonal dip around Christmas time, which was mirrored across all states. 

In terms of percentage increases, Victoria saw a monster 44 per cent increase in the value of mortgages written as compared to the prior year. 

With the exception of South Australia, there were solid results elsewhere as well.


And finally, to the role of investors.

“The increased demand in Victoria was driven across the board by investors…”

New South Wales (i.e. Sydney) is still the speculator paradise, but the percentage of investor loans eased in the month back to 38 per cent from the record high 40 per cent seen in May 2014, suggesting that perhaps homebuyers, upgraders and refinancers are now increasingly coming to the fore. 

AFG’s first homebuyer data is largely a waste of time, clearly showing outlandish variances between the states with first homebuyer grants and those without. 

The average loan-to-value ratio for new mortgages written was only 68 per cent for investors as most buyers use large deposits and maintain significant buffers. 


To sum up, low interest rates are fuelling property market price growth and look set to continue to do the same.

Weak fundamentals in Victoria’s property market appear to have been brushed aside with a very strong increase in mortgages written. 

The increased demand in Victoria was driven across the board by investors (34.9 per cent), refinancers (34.4 per cent), first homebuyers (9.6 per cent) and upgraders (21.1 per cent).

About the Author

Pete Wargent used a buy and hold approach to shares, index funds and investment properties to make his first million in his early 30s. He quit his full-time job at 33. He helps others do the same.

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