Property investors continue to pile into mortgage market

The Australian mortgage market held firm in May, despite the Reserve Bank of Australia (RBA) commencing its rate tightening cycle with its initial 0.25% hike.

According to the Australian Bureau of Statistics (ABS), the total value of new mortgage commitments rose a seasonally adjusted 1.7% in May 2022, but was down 0.4% year-on-year:

Owner-occupier commitments rose 2.1% in May, whereas investor commitments rose 0.9%.

The next chart shows divergence across both categories. Investor mortgage commitments grew by 23.7% in the year to May, versus a 9.7% fall in annual owner-occupier mortgage commitments:

The recent surge in investor mortgage demand continues to crowd-out first home buyers (FHBs). Although FHB mortgages rebounded 3.4% in May they were down 26.5% year-on-year. FHB’s mortgage share has also fallen to 15.4% – well below the pandemic peak – as the investor share has surged:

Given the RBA is tipped to hike interest rates aggressively over the remainder of 2022, expect mortgage demand to stall as buyers wait on the sidelines.