AFG is calling on the RBA to leave rates on hold when it meets later today after the traditional uplift in spring mortgage sales failed to materialise.
According to AFG general manager sales and operations Mark Hewitt, August usually heralds a 10 per cent increase in mortgage sales.
However, this year the AFG Mortgage Index recorded a 0.3 per cent drop in mortgage sales – pushing September 2010 sales figures 20 per cent lower than September 2009.
Mr Hewitt said the data showed borrowers were wary of further rate hikes and, as such, were putting their dream of home ownership on the back burner.
The caution of consumers was further underlined by a jump in the take-up of fixed rate mortgages from 3.9 per cent of all mortgages sold in August, to 5.4 per cent – the highest level for fixed mortgages since June 2009. This suggests that more buyers expect further rate rises in the near term.
“This latest data confirms what we’ve been seeing from other sources – that there is a lot of caution and uncertainty in the market right now. Potential property buyers are still digesting the previous six rate rises and uncertain economic messages,” Mr Hewitt said.
“Another rate rise could have serious ramifications on the market.”
AFG Mortgage Index also shows that Loan to Value Ratios (LVRs), loans expressed as a proportion of the value of a property, remain at a low level of 63.0 per cent. Low LVRs also tend to reflect consumer caution.
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