Trends in the Australian Mortgage Industry

By: Vicky Edema

The final few months of the year 2006 proved very unpredictable and harsh for the Australian mortgage industry. This was because the lending values went in the upward direction in the home mortgage sector and the rate of house affordability went down for the first time in the last ten years. Sales of houses gained speed in every suburb and the city of Sydney recorded an unbelievable increase of 30 percent over the total sales of the earlier part of the year. Seeing this increase at the end of the year, the HIA [Housing Industry Association] has predicted that the coming year is going to be a record year for the home mortgage industry in Australia.

Experts are speculating that the recent rise in home mortgages is due to the combination of many factors which includes:

The return of first home buyers: this is the most important factor for this surge in the mortgage industry in Australia. These first home buyers stayed away from the market during most of 2005 and early 2006. This re-entry of first home buyers reinforced the faith in stability of the economy and interest rates and also spread more awareness regarding the first home owner grant. The rise in housing affordability has inspired many fresh home purchasers to go and buy a new home.

Dropping of house prices: for most part of the year, it was sensed that the cost of buying a new home stayed higher than usual but in the latter part of the year prices were slashed in most parts of Australia (Perth being the exception). This trend led many people to think that they could also afford new homes.

Stable interest rates: the existing stability in interest rates of mortgages and a possibility of them going down sooner rather than later has created eagerness among the buyers. This has increased the market for established homes and the demand for newly constructed homes.

Increase in incomes: a little increase in annual income of people all over Australia is also considered an important factor in the increase in purchasing of real estate. More and more Australians are comfortable with the types of mortgages available and hence, more homes are bought.

Following are the trends that the Australian mortgage industry has seen so far and is expected to follow in 2007

>> The Australian mortgage market slowed in the years 2005 and 2006 as the housing boom was at an all time high. At the end 2005, the housing loan portfolio of Australian banks was over $680 billion.
>> Prices of houses have increased nationwide and the appreciation rates will slow. This is expected to happen in near future.
>> Consumers are going away from the process of investment financing and the owner occupied financing is contributing lot more to the total of loans.
>> The urgency of expert advice and proper guidance is increasing as mortgage loan products are getting multifaceted day by day. The percentage of home loans provided by mortgage brokers has reached to 35 percent of the total loans taken.

With keeping all these trends in mind, it is obvious that in 2007 the Australian consumer will benefit from a more profitable deal in home loans than in the previous year.

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