Housing mortgages slump in January

As floodwaters surged in January the flow of housing finance slowed to a trickle.

The number of mortgages processed during the month by Australian Finance Group Ltd (AFG) was the lowest recorded since before the mortgage broker began compiling mortgage sales in late 2003.

AFG, which claims 10 per cent of the national mortgage market, published the January figures on Wednesday.

The AFG figures, while less comprehensive than the estimates of housing finance approvals compiled by the Australian Bureau of Statistics (ABS), are much more timely and generally tell much the same story.

The numbers are not seasonally adjusted but the weakness in January is still clear.

From 2004 to 2010, the average drop in the unadjusted series in January was 3.9 per cent.

The biggest January fall over that period was 18.7 per cent, recorded in January 2010.

The fall in January 2011 was 36.9 per cent, almost twice the previous record, so something abnormal clearly happened this time.

Queensland was the worst affected, with mortgages processed in January down by more than half compared with December.

AFG reported big falls in other states as well - 39.6 per cent in Victoria, 33.6 per cent in South Australia, 31.8 per cent in New South Wales and 28.6 per cent in Western Australia.

AFG executive director Kevin Matthews put the falls in other states down to sympathy with Queensland's troubles.

The Queensland property market had been affected, as may have been expected, he said.

"But the disaster has affected sentiment across the whole country.

"In times of national crisis, people hunker down and put off major buying decisions," Mr Matthews said.

There were some other interesting aspects to the AFG data.

One was that the average loan-to-valuation ratio (LVR) fell to 54.9 per cent in January, from 63.2 per cent in December, the lowest it has been - and the first time under 60 per cent - since

AFG's LVR records began in early 2005.

Another is that the average mortgage size fell to $365,799 in January from $379,444 in December.

Taking the LVR into account, that implies increases in the average value of residential properties purchased of about 11 per cent between December and January, and about 22 per cent over the

year to January.

Given the absence of any evidence of rising prices that might explain this, the obvious implication is that the slump in demand for mortgage finance has been felt mostly at the lower end of the housing price range.

ABS housing finance figures for December are due on February 14 and the January figures will be published on March 9.