‘Strong trend’: Equifax mortgage data signals market correction

The latest Quarterly Consumer Credit Demand Index by Equifax, released today, shows that mortgage demand has fallen significantly over the last quarter of the 2017 financial year.

The trend over the last six quarters shows a strong but short-lived pick-up in mortgage applications over the December quarter (6.7 per cent) before falling to 4.5 per cent over the March quarter.

Mortgage applications have now eased in all jurisdictions during the June quarter, including in NSW and Victoria where housing markets have been the strongest.

Overall mortgage applications fell at an annual rate of 0.9 per cent in three months to 30 June.

“It came off a year or so ago and then it had a bounce and has started to come off the last two quarters again,” Equifax senior GM consumer product, Angus Luffman, said.

“Anyone with a mortgage knows that different regions and different postcodes move at different speeds at different times,” Mr Luffman said. “What’s interesting here is that the trend of slowing growth or decline is common right across the country. Every state is at a slower growth rate or in a bigger decline than it was last quarter. That is compelling. The trend is in one direction.”

Mr Luffman highlighted that the trend in mortgage applications is a lead indicator of housing turnover and therefore house prices by two to three quarters.

“This is a particularly strong trend,” he said. “Any debate about whether the housing market is softening should now be put to rest, as we can clearly see that, even in the historically strong geographies on the Eastern seaboard, mortgage application demand is slowing or already in decline.”

The figures come just days after Deloitte Access Economics flagged “storm clouds on the horizon” for Australia’s best performing housing markets.

The group’s top forecaster and leading economist Chris Richardson warned that “today’s heroes – NSW and Victoria – have clay feet”, highlighting that a house price boom borrows growth from the future.

“Both NSW and Victoria will have to pay back some of that in the years ahead as today’s housing prices gradually reconnect with reality,” he said.

“Luck’s a fortune, and NSW has it in spades amid the shift to lower interest and exchange rates since 2012. But storm clouds are building, as the housing price boom has artificially supported retail and home building. There’ll be an eventual butcher’s bill to pay as those supports reverse.”

Meanwhile, Equifax data shows the struggling real estate markets in the Northern Territory (NT), Western Australian (WA) and to a lesser degree South Australia (SA) all saw a significant fall in mortgage applications over the latest quarter.

NT mortgage applications plunged 17.5 per cent (from -8.8 per cent in March), SA contracted 4.6 per cent and WA mortgage applications fell heavily by 18.5 per cent (from -12 per cent three months earlier).

[Related: Deloitte sees 'storm clouds' for NSW property market]