Jitters over rising interest rates and worries about the property market are putting a damper on Australia's appetite for debt, a new survey showed.
Mortgage broker Australian Finance Group (AFG) said home lending sales plunged 30% in December to 5,783 from 8,201 in November - the largest monthly drop since the index was introduced. The size of the average mortgage shrunk to $300,212 from $307,665 as the higher cost of servicing a loan continued to weigh on borrowers' hip pockets.
"We certainly had a subdued end to 2006. While commentators have been talking about the 'two-gear economy' for some time, from a mortgage perspective that model could be losing its relevance," said Mark Hewitt, general manager of sales and operations for AFG.
Mortgage sales in NSW suffered the biggest decline, plummeting 37% for the month. Even the red hot property market of WA was unable to escape the dramatic fall of mortgage applications, dropping 33%. Victoria tumbled 31%, while home loans applications declined 28% in Queensland.
"Both WA and Queensland have come down from their red hot levels and we're seeing the same signs of caution appear in those states as in NSW and Victoria, with consumers worrying about property markets in general and interest rates in particular," said Hewitt.
AFG data also showed that in New South Wales the average mortgage size peaked at $384,000 in October, before coming to a close at $376,000. In Victoria the fall was more significant, with a top of $294,000 in September, followed by an average size of $268,000 in December.
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