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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 14 October 2015

Average mortgage size soars

Mortgage volumes +16 per cent

Having recently listed on the securities exchange Australian Finance Group (AFG) now opts to release its aggregate mortgage data on a quarterly basis, having previously released monthly figures.

The figures for the September 2015 quarter, which are not seasonally adjusted, revealed a +16 per cent year-on-year increase in mortgage volumes.

Mortgage volumes have increased by more than +68 per cent over the past three years, which may be partly reflective of changes in market share. 

Average mortgage size soars

Significantly the average new mortgage size in Australia has soared further from $433,000 to $471,000 over the past year.

Unsurprisingly the main driver of the gains has been the average size of mortgages sold in New South Wales which has jumped by more than $60,000 over the past year, and has soared from $454,000 to $584,000 over the past three years. 

Over the past year the average mortgage size also increased significantly in Victoria (+$34,000), Queensland (+$24,000), South Australia (+$30,000).

There were also increases over the last year in Western Australia and the Northern Territory, but these resources states saw declines in their respective average mortgage sizes in Q3 2015.

Investor market share declines

Perhaps the most significant aspect of this release was the very sharp drop in investor market share.

According to AFG the investor share appears to have stabilised in recent months at around 32 to 33 per cent of the mortgage market.

Notably investor market share for Q3 2015 of just 33 per cent was well below the 3 year average of 38 per cent.

This once again implies that APRA's advisory speed limit of +10 per cent annualised credit growth in relation to invetsment loans will be comfortably met in due course, and the housing market story going forward will largely be one of to what extent owner-occupier loans pick up the slack.

Westpac taps the market with raising

This morning Westpac went into a trading halt and announced that it would be tapping investors for a $3.5 billion renounceable entitlement offer in order to bolster its capital position, while noting in a separate announcement to the ASX that it will be whacking 20bps onto its home loan and investment loan rates, effective from November.

It is widely expected that the other retail banks will follow suit in due course in respect to mortgage rates.

This move seems likely to be a game changer for cash rate futures markets, with another interest rate cut from the Reserve Bank as soon as next month already considered by some to be an each way bet.

If Thursday's employment data is weaker than expected then a rate cut in November may become more likely than not.

AFG noted in its release that many borrowers consider further rate cuts to be increasingly likely, with fixed rate mortgages declining to just 11.3 per cent of total loans processed for the quarter, which is the lowest level for more than three years.