Australian Finance Group (AFG) has released its housing finance data for the month of July, which registered a 12% increase in mortgage applications over the month, but more importantly (since the series isn’t seasonally-adjusted) a 21% increase the number of applications over the year. It was also the Group’s strongest July on record, with 8,482 mortgage applications (valued at $3,407 million) processed over the month (see next chart).
A breakdown of mortgage application growth across the mainland states is provided below:
- Up 32% in New South Wales over the year ;
- Up 17% in Victoria over the year ;
- Up 15% in Queensland over the year;
- Up 29% in Western Australia over the year; and
- Down 4% in South Australia over the year.
AFG also reported shrinking first home buyer (FHB) mortgage share in July, driven by weakness in New South Wales, Queensland, and Victoria following the removal of grants on pre-existing dwellings:
- National: 11.6%, down from 17.3% in July 2012;
- New South Wales: 4.3%, down from 14.4% in July 2012;
- Victoria: 13.4%, down from 21.7% in July 2012;
- Queensland: 5.8%, down from 13.8% in July 2012;
- Western Australia: 22.6%, down from 22.7% in July 2012; and
- South Australia: 16.5%, up from 9.6% in July 2012.
As noted previously, some caution should be exercised in interpreting AFG’s figures and extrapolating its results to the overall mortgage market, as measured by the Australian Bureau of Statistics (ABS).
AFG’s data measures mortgage applications, whereas the ABS measures actual mortgage commitments. According to AFG’s General Manager of Sales & Operations, Mark Hewitt, just over three quarters of applications on average become mortgage commitments, although this figure can obviously fluctuate month-to-month. AFG’s market share has also been rising in recent years.
Therefore, while AFG is a useful guide as to the strength of mortgage demand, its results do not necessarily translate to the overall mortgage market as captured later by the ABS.
To illustrate, consider the below chart showing how the growth of AFG mortgage applications has diverged significantly from ABS mortgage commitments since November 2009:
RP Data’s Mortgage Index, which is supposed to provide a leading indicator of housing finance commitments, shows a recent flattening trend in mortgage activity after a solid up trend through June, suggesting the ABS will register an increase in finance commitments when it reports its June results tomorrow (see next chart).
