Australian mortgage demand fell in June, says broker

SYDNEY - Sales of mortgages in Australia looked to have fallen sharply in June as a range of factors including higher interest rates curbed demand, the country's largest mortgage broker said on Tuesday.

The Australian Financial Group said its mortgage sales fell 12 per cent in June, from May, to 7599 nationally. AFG, which has 8.2 per cent of the national market, said the downturn was not unexpected after a strong May.

"Seasonal factors, the stock market correction and even World Cup fever may account for some of the decline in June," Malcolm Watkins, executive director of AFG, said in a statement.

"However, it may also be that we're starting to see the latest rate rise begin to bite," he added. "Combined with higher petrol prices, we expect the market to remain steady but subdued in the months ahead."

Australia's central bank raised interest rates to 5.75 per cent in early May as a precautionary move against growing inflationary pressure.

AFG noted that mortgage sales even fell 12 per cent in the red-hot property market of Western Australia, which has been riding a commodity boom in recent years.

Still, the state remained the national favourite for investors with 48 per cent of all new mortgages sold for investment purposes, rather than to owner occupiers.

Average mortgage sizes rose to A$305,000 ($372,000) in June, up 15 per cent on a year earlier. Western Australia had seen the most rapid increase, with average mortgage sizes growing 34 per cent in the past year.

Nationally, the proportion of fixed interest mortgages increased further to 20.7 per cent - compared to a low of 9 per cent in August last year - as home buyers hedged against the risk of future rate increases.

- REUTERS