Honey, I shrunk the mortgage

Some interesting analysis from Commsec (h/t auhousingcrash), confirming the thoughts of H&H last week:

The average loan size plunged 1.9 per cent in September, highlighting the drop in home prices and greater influence of buying activity at the lower end of the market. The average home loan is now 0.6 per cent smaller than a year ago. It may not sound like much, but it is the biggest annual  decline in over a decade.


Housing Finance – 09 November 2011


  1. People aren’t buying the newer properties often simply because they are a lot more expensive and on smaller blocks of land than established properties. Until the prices match closely given the levels of affordability most people will choose the established house simply because it is cheaper.

    In Sydney looking at a few house and land packages, or land + build costs I can see why people still go to the established home which is still over budget for the the bottom FHB/Investor segment anyway. Why pay more when I’m already stretched I can imagine some people thinking.

  2. Prior to mid 2008 getting a high LVR loan was quite easy, all you needed was a small deposit, a good credit record and the ability to repay.

    Post GFC the banks divided into two camps, but in all cases they lowered their LVR lending ratios. that was partly in respomnse to their own risk, and partly in response to an expectation that an RMBS issue would be easier to sell if it contained 90% LVR loans and lower.

    We are now at the point where 95% LVR plus LMI cost loans are beingdone regularly, but not with quite the same speed as before. the mortgage insurers have tightened considerably, especially on above 90% LVR loans. Deals that once would have sneaked through are now being booted out. Any weakness and a high LVR loan won’t make it through.

    I think that plus the lack of house price growth nationally has lead to a slowing and even this small reversing of growth in loan size.

    To be honest given that high end LVR’s are probably about 5% lower now than they have been in the past, I would have expected this position to be reached earlier, and even a neutral result may not mean prices are falling given that LVR’s are slightly lower.

    Sales are undoubtably weaker though, I wasn’t suggesting otherwise.