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Record-low interest rates and strong house price growth is leading to surging mortgage applications, new research has revealed.
Stats released by Equifax showed that over the March quarter demand for mortgages lifted by 23.5 per cent, continuing to outperform every other type of credit.
Demand for loans follows surging property prices, with the national median house price up for the second consecutive quarter for the first time since 2009, adding another 5.7 per cent in the first three months of 2021 – its steepest quarterly incline in almost 18 years – to reach a new record of $899,509, Domain’s latest House Price Report revealed.
Demand for mortgages grew throughout Australia, up 23.5 per cent compared with the March quarter 2020, with every state and territory experiencing growth.
The eastern seaboard states continued to see an acceleration in home buyer activity, with Victoria showing a bounceback from a subdued previous quarter in lockdown.
Kevin James, general manager advisory and solutions at Equifax, said the market is showing a shift to asset-based lending, with mortgages and auto loans proving more popular than liabilities like credit cards and personal loans.
“Mortgage demand includes loans for new properties as well as refinancing. Historically, movements in Equifax mortgage application demand data have led changes in house prices by around six to nine months,” he said.
“Mortgage applications are not part of the Consumer Credit Demand Index but are a good indicator of home buyer demand and housing turnover.”
The general manager points to strong consumer incentives enticing buyers to enter the market.
“Ultra-low interest rates are enticing more people into the market, but also an incentive for home owners to refinance in the quest to find a better rate,” Mr James said.
While demand for mortgages continues to soar, other forms of credit are seeing sharp declines.
This was led by strong falls in credit card applications, which fell by 29 per cent, and personal loans, which are down 14.5 per cent.
While their decline has softened slightly compared with the previous quarter, Equifax said it is not enough to blunt their downward trajectory.