AFG has released its January mortgage sales data and has posted another record month:
AFG, Australia’s largest mortgage broker, processed more home loans last month than in any January before, according to new figures published today. AFG Mortgage Index shows that the company processed $2.2 billion of home loans, 24% more than in January 2012, despite the natural disasters in QLD and NSW last month.
AFG has 10% of the total mortgage market (Source AFG and ABS statistics) and AFG Mortgage Index trends usually foreshadow ABS figures for each month published six weeks later.
Driving demand were strong levels of activity in WA and NSW. In WA mortgage volumes were somewhat higher than for NSW ($583 million compared to $569 million) with a variety of buyer types including first home buyers, upgraders and investors. NSW would have been even stronger except for the slump in first home buyer demand by about two thirds since the withdrawal of first home buyer grants for established properties last September.
So, let’s dig into the data. Here’s is that chart for national sales:
A few points of note. First first home buyer demand in NSW (4.1%) and QLD (5.2%) remains terrible and it is these states that are dragging down the first home buyer average.
The proportion of fixed loans plunged so its looks like punters are expecting more rate cuts.
There is also a quite marked fall in the average loan amount, which is quite odd in any “recovery” scenario. The fall was driven largely in NSW and WA. It leads me to wonder if the result is because a larger than “normal” portion of these loans are being directed at new homes, not existing dwellings.
We know for instance that some of the uptick in investment mortgages late last year was driven by new home construction driven by WA’s immigration surge and NSW’s fiscal incentives. Just a theory.
For comparison, here is the chart of the total number of mortgages originated for established dwellings (not seasonally adjusted) which is the one we need to judge house prices:
In NSW and SA the trend looks sideways. VIC, QLD and WA have gentle up-trends underway. All are levels significantly below historic ranges. It’s the same with total mortgage lending, telling us that some of AFG’s record monthly sales is the result of market share gains.
It’s clear that for the purposes of house prices that mortgage origination is slowly responding to stimulus, and that AFG numbers are significantly exaggerating it.