Credit squeeze hits volumes
Australia's largest mortgage aggregator Australian Finance Group (AFG) implored in its March 2019 quarter ASX release that the figures for the first quarter of calendar year 2019 were "a wake-up call for policymakers" as activity floundered at the lowest level in half a decade.
The banking Royal Commission dragged on all the way into February 2019, and AFG pointed to the credit squeeze as the cause of lower mortgage volumes, with declines in all states and territories pushing investor market share to an all-time low "despite moves by regulators to encourage activity".
The fact that declines have been seen everywhere across the country represents compelling evidence that credit availability initiated the slowdown.
The fact that declines have been seen everywhere across the country represents compelling evidence that credit availability initiated the slowdown.
In an interesting and obliquely related development the AFR reported that the Labor Party has now deleted the detail of its proposed negative gearing and capital gains tax policies from its website.
That's tantamount to an admission that Labor's figures were clearly wrong on the volume of investment going into established dwellings, which has been massively overstated at 93 per cent.
Perhaps another driver of the deletion was the previous assertion that there were too many investors in the market, which was self-evidently the case when the policy was formed back in 2016, but clearly no longer on these numbers.
There'll be no backing down on the policies with the election only a matter of weeks away, though.
Average mortgage size higher
The average mortgage size in the March 2019 quarter was $505,882, up modestly from $497,617 a year earlier.
The year-on-year increase was driven by a $24,000 increase in Queensland as buyers seeking more value take their equity north, and an annual increase of $19,000 in New South Wales.
Interest-only lending market share is off the lows at 19 per cent, but way down from an unprecedented high of more than half of newly brokered loans at the peak.
By March a gradual shift towards fixed rate and interest-only loans with the major banks was already in evidence, and I expect that to continue in the June quarter and beyond.
The market share secured by major lenders has now steadied at 59 per cent, albeit way down from 78 per cent in 2013.
National Australia Bank has seen its market share via AFG brokers plundered, while the non-bank home lender Resimac has garnered a predictable increase thanks to its attractive offerings and sometimes easier serviceability.
By February AFG's share price had been all but halved to 84 cents by the Royal Commission findings and its recommendations.
But there has been a sharp recovery to $1.22 as the reality that broker remuneration is tricky to change for the better sinks in.
AFG closed out the day's trade at $1.22.
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The Reserve Bank shifted to a data-dependent easing bias in its latest Monetary Policy meeting.
So if unemployment rises as inflation remains weak then the cash rate could be cut by July or August.
Some economists think that the cash rate could fall below 1 per cent this year.
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Addendum:
Following on from Labor's negative gearing blunders and the deletion of nigh on 100 paragraphs of policy details, reams of information on superannuation policy have been reportedly cut from its online manifesto too.
Like almost everyone else I see this is a pretty much unlosable election for Labor.
But BS neatly rounded off a hat-trick of gaffes by answering a pointed question on the cost of emissions targets by talking about, erm, wages, and corporate profits, and TAFE...
The sooner this election campaign is over the better.
