Aussie mortgage demand fades as interest rates rise

The Reserve Bank of Australia (RBA) has released mortgage growth data for March, which reveals that Aussie mortgage demand continues to soften.

Quarterly mortgage credit growth slowed further to 1.9% – down 0.2% from January’s 12-year high:

Australian quarterly mortgage growth

Nevertheless, owner-occupiers continue to drive mortgage growth, rising by 2.0% over the quarter versus 1.7% growth for investors:

Quarterly mortgage growth by segment

By contrast, annual mortgage growth continues to rise from record low levels. It rose to 7.9% in the year to March 2022 – the highest level since August 2010:

Australian annual mortgage credit growth

Again, this growth is being driven by owner-occupiers, whose annual mortgage growth was 9.2% in the year to March 2022, versus 5.3% growth in investor mortgages:

Annual Australian mortgage growth by segment

The latest slowing in mortgage demand makes sense given mortgage rates – both fixed and variable – have risen from their pandemic lows:

Average Australian mortgage rates

Other things equal, rising mortgage rates reduces how much a purchaser can borrow and shrinks the pool of potential buyers.

With interest rates tipped to rise sharply from mid-year, mortgage demand should slow further in the months ahead.

Unconventional Economist

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