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The threat of further rate hikes has cooled buyer demand.
According to the latest AFG Mortgage Index, mortgage sales declined by 3.7 per cent in July, suggesting home buyers have officially retreated into their shells in an attempt to ride out the current economic woes.
Month-on-month mortgage sales fell most in Victoria, by 7.4 per cent, with declines also recorded in New South Wales (5.9 per cent), Western Australia (5.0 per cent) and Queensland (0.5 per cent).
Only South Australia recorded an increase, but off a much lower base, of 13.7 per cent.
The most active part of the mortgage market remains refinancing, with two out of every five new mortgages arranged to refinance an existing home loan. By contrast, the proportion of owner occupiers arranging mortgages to move or upgrade their homes was just 11.7 per cent of all mortgage sales.
AFG’s general manager of sales and operations Mark Hewitt said the figures show Australians are worried about their financial future.
“Ever since the interest rate rise last November, home buyers have gone into their shells. Western Australia, supposedly the prime beneficiary of a resources boom has the most depressed property market of all. Domestic financial news is dominated by talk of rate rises and the carbon tax. Gloomy international financial news has seen stock markets slump. We’re all looking for strong economic leadership to provide the market with some much needed confidence,” he said.
In Western Australia, total mortgage sales for the first six months of 2011 were 3 per cent lower than for the last six of 2010.
Major banks continue to dominate the lender market, with 81.7 per cent of all new home loans arranged by the four major banks, including the subsidiary brands they own.
Mortgages are loans that are used to buy homes and other real estate where the property itself serves as collateral for the loan.