NSW leads national fall in owner-occupier mortgage demand in February: ABS

The mortgage market continued to go backwards in February, with the total value of mortgages (excluding alterations and additions) falling 1.3% to $20.29 billion following a 2.3% decline to $20.73 in January.

Over February it became clearer that the withdrawal of first-home buyer stamp duty concessions in NSW for established dwellings brought forward demand.

NSW owner-occupier mortgage commitments fell by 9.4% in February following an 8.5% drop in January.

In December NSW mortgage commitments increased by 8.3% as first-home buyers acted to beat the established home stamp duty concession, which ended on January 1.

This followed a smaller 3.6% rise in November.

South Australia (+2%), Western Australia (0.8%) and Victoria (0.3%) were the only states to record increases in seasonally adjusted owner-occupier mortgage commitments in February.

Investor finance, remains relatively weak but volatile, rising by 4.4% for the month following a 6.8% drop for January.

Fixed loans for investment purposes increased by 4.4% in February to $6.9 billion following a 7.1% decline to $6.58 billion in January.

Westpac senior economist Andrew Hanlan says the February figures show that NSW is "correcting after a sizeable bring-forward ahead of 1 January in response to less favourable stamp duty arrangements while "Queensland [housing] finance softened ahead of the state election".

"Interest rate cuts by the RBA in November and December have so far failed to gain much traction.

"Housing affordability has improved, which acts to boost housing finance. However, this is being countered by a number of negatives: soft labour market conditions, a lack of consumer confidence, stretched housing affordability and global uncertainties.

"Also, commercial banks in February moved independently of the RBA, lifting the average bank standard variable mortgage rate to 7.40% from 7.30%, down from 7.80% as at last October.

"The lack of response from the interest rate sensitive housing sector adds weight to our view that the RBA needs to do more. We expect the RBA to lower rates at the May meeting with a follow-up move in July," says Hanlan

Loans for the purpose of buying a new house continued to trend down with a big 10.4% drop recorded in February following a 6.3% fall in January 2012.

In original terms, the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments fell to 17.2% in February 2012 from 20.3% in January 2012.

Between February 2012 and January 2012, the average loan size for first home buyers fell $3,300 to $277,600.

The average loan size for all owner-occupied housing commitments fell $8,700 to $282,800 for the same period, according to February housing finance figures released by the ABS.

This follows January figures, where total mortgage lending fell by 2.3% to $20.73 billion on a seasonally adjusted basis, with the value of owner-occupier housing loans increasing by just 0.1% to $14.15 billion and loans for investment purposes falling 7.1% to $6.58 billion.