Australian mortgage demand collapsed in August following four consecutive interest rate increases by the Reserve Bank of Australia (RBA).
According to the Australian Bureau of Statistics (ABS), the total value of new mortgage commitments fell a seasonally adjusted 3.4% in August 2022 to be down 12.5% year-on-year:
Broad-based declines in mortgage commitments.
Owner-occupier commitments fell 2.7% in August, whereas investor commitments fell 4.8%.
The next chart shows divergence across the two categories. Investor mortgage commitments were down 6.4% in the year to August, versus a 15.1% fall in annual owner-occupier mortgage commitments:
Annual new mortgage growth negative.
The above data obviously misses September’s 0.5% increase in the official cash rate, nor the expected further rise today.
Nevertheless, the above slump in mortgage demand is the key reason why Australian dwelling values have fallen sharply, led by Sydney:
Sydney leads nation’s housing decline.
Rising interest rates reduces borrowing capacity, which obviously then flows through to lower house prices.
Economists and the market almost universally expect the RBA to lift the OCR further over coming months, which will place further downward pressure on house prices.
The only question is how much?
