Aussies Keeps Loan Ratios Down

Smaller mortgages are the trend with Australians nowadays as house prices soften in Australian capital cities.

Australians have been observed nowadays of borrowing less as homes for sale prices slide.

This trend has further cemented to the Australians the culture of reducing debt which was brought about by the global financial crisis.

According to the data from AFG, Australia’s biggest mortgage broker, people who were pulling out mortgages in June signed up for smaller loans proportional to the value of their property, which are loans representing a lower percentage of their property’s value than at any time during the previous six months.

With prices of design house sliding, Australians are borrowing lesser amounts which are in proportion to their property prices.

Statistics reveal that the average loan to valuation ratio (LVR) was 64.2 per cent nationally and the average LVRs is declining in NSW, Victoria, South Australia and the Northern Territory.

As house land package prices soften, Australians are signing up smaller mortgages. And in June, it was revealed that the average mortgage size across Australia was $384,042, which is about 1.1 per cent lower than the previous month.

All throughout the states, the average mortgage size waned except in NSW and Western Australia, where a growth of 0.5 per cent and 3.3 per cent, respectively, was being observed. However in WA, the average mortgage size increased from $399,000 to $412,000.

Meanwhile, as a positive sign of the gradual recovery of Queensland from last summer’s floods and natural disasters, mortgage sales reached the same level in June as they did in the corresponding month a year earlier for the first time in five months, which indicates confidence in the market is returning.

However, the residential property landscape still remains unresponsive, with the annual housing credit growth showing a slow down to almost 6 per cent, as compared with an average 14 per cent over the past 34 years.

Likewise, a slowdown in household credit and in most values of assets including housing was also noted.

However, the central bank gave borrowers another chance for respite, in which the overnight cash rate was left at 4.75 per cent.

Meanwhile, Jonathan Mott, a UBS analyst, told clients last week that the housing credit growth was expected to slow down with further thanks to the recent pressure on household budgets caused by higher interest rates and utility, food and petrol prices.

UBS predicts that the housing credit growth will slow down to 4 per cent by the years 2013, and the personal lending will fall to 2 per cent.

Good News

People who are intent on borrowing or refinancing are being offered many deals due to the fact that big banks are jostling in to grab another 1.7 per cent share of the mortgage market in June from smaller competitors.

AFG’s general manager of sales and operations, Mark Hewitt, says that big banks now have 82.1 per cent of the market as these major lenders are hungry for business.

Meanwhile, non-major banks took 21.3 per cent of the refinancing deals and 23.8 per cent of first home buyer mortgages in June.

The big four have gained more toeholds since March, due to the fact that 25 per cent of first display homes buyers and borrowers who are seeking to refinance have chosen to borrow from a smaller bank or non-bank lender.

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