The upward movement in official interest rates has affected confidence among potential borrowers in Western Australia, according to figures from the Department of Land Information.
The upward movement in official interest rates has affected confidence among potential borrowers in Western Australia, according to figures from the Department of Land Information.
In its September Business Activity Profile, the department reported that mortgages lodged during the month fell by more than 10 per cent, to 11,117 mortgages from 12,411 in August.
September figures grew just 1 per cent compared to 11,052 mortgages in September last year.
The softening of activity comes as the DLI reports a bumper 2005-06 fiscal year, registering $55.1 billion in mortgages, representing a $10.1 billion increase on the previous year.
In a sign of supply beginning to catch demand, the number of sub-divisional lots created reached an all-time record in September, up 4 per cent to 2,952 lots from August’s previous record of 2,847 lots.
The new September figure is a 96 per cent rise on the 1,505 lots created in September 2005.
Finance broker and Mortgage Choice principal, Andrew Sawyer, believes the increase in supply of both established housing and land is starting to filter through, resulting in fewer outstanding pre-approved loans.
“There was almost a siege mentality in buying property recently, but a little of that has come off. There are still people sitting on the side with a lot of money that are committed to purchase, but they’re being a little more cautious,” Mr Sawyer said.
In a climate of rising rates and with a greater variety of mortgage products on the market, borrowers were comparing different loan options and often opting for fixed rate loans, he said, particularly lower priced basic variable rate loans rather than standard variable loans.
Mortgage Choice’s latest housing loan approval data for September reveals a significant drop in approvals of standard variable loans in WA, down to 18 per cent from a solid 32 per cent the previous month.
The new figure is 17 percentage points below the national average.
Mortgage Choice national manager corporate affairs Warren O’Rourke said the corresponding jump in basic variable loans for the month was due in part to it being similarly priced to fixed rate loans and having fewer “bells and whistles” than its standard counterpart.
However, Mr O’Rourke expects October figures to show another increase in fixed rate loans later in the month and an almost certain spike in November.
“Whether rates go up or not, there will always be underlying demand for housing. In terms of the local market they’ve been talking about it plateauing for a while, but the moment the market starts to give some indication of this, the demand kicks in again,” he said.
