Is it doom and gloom for the housing market going back to GFC-level lows? Or is the housing market stabilising? Veda says there are more mortgage enquiries for the April quarter indicating things are evening out, but the HIA has previously warned new home loan numbers will dip significantly for the rest of 2012. We consider the published figures, and look at what this may indicate for new loans and brokers and credit repairers alike heading into the second half of 2012.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.
The results of Veda Advantage’s Consumer Credit Demand Index for the second quarter of 2012 shows mortgage enquiries were up (+0.7%) for the quarter building on the small rise (+0.2%) seen in the March quarter. Whilst still at historically low levels, Veda says the last two quarters results confirm that mortgage enquiries are stabilising.
“Mortgage enquiries are a good lead indicator of housing demand. This stabilisation in mortgage enquiries suggests housing turnover is also stabilising. Lower interest rates and an improving housing affordability index align with the observed stabilisation in enquiries, after many quarters decline.” Angus Luffman, head of consumer risk at Veda says.
Veda says the RBA’s cuts in May and June appear to have helped lift consumer sentiment close to a neutral level. However, fears about the global and domestic economic situation, in addition to share market declines and labour market uncertainty means that consumers remain cautious about credit.
This optimism contrasts with concerns expressed earlier in the month by the Housing Industry Association (HIA) and reported in Australian Broker, which warns the second half of 2012 will see new home loan numbers dip to GFC-level lows.
HIA is reportedly commenting on data released in conjunction with findings from the Australian Bureau of Statistics.
HIA’s chief economist Harley Dale said it was a “disappointing result.”
“It is evident that new home starts will bottom at GFC-equivalent levels this year, which is a very poor outcome for Australian businesses, households, and therefore the wider economy,” he tells Australian Broker.
Figures show an overall dip of 2.4% in May, although it did show state-level growth across Queensland, South Australia and Tasmania.
Australian Broker reports decline was recorded across NSW, Victoria and the Northern Territory, which reportedly lead the pack at an alarming 23.8% drop.
“We needed to be seeing a strong recovery in new home lending coming through in the first half of 2012 to signal a significant turnaround in residential construction from what will historically be a very low trough,” said Dale.
“That simply isn’t the case and government action in addition to lower borrowing costs is the combination required to restore healthy levels of confidence and activity.”
Official figures for Housing Finance Data for May 2012 from the Australian Bureau of Statistics do indicate a fall in housing finance from April to May, but the latest figures show the number of new dwelling commitments actually rose marginally (0.8%) and the number of commitments for the construction of dwellings rose 0.3%.
ABS HOUSING FINANCE MAY 2012 KEY POINTS
VALUE OF DWELLING COMMITMENTS
May 2012 compared with April 2012:
■The trend estimate for the total value of dwelling finance commitments excluding alterations and additions fell 0.5%. Investment housing commitments fell 0.7% and owner occupied housing commitments fell 0.3%.
■In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell 1.4%.
NUMBER OF DWELLING COMMITMENTS
May 2012 compared with April 2012:
■In trend terms, the number of commitments for owner occupied housing finance fell 0.5%.
■In trend terms, the number of commitments for the purchase of established dwellings fell 0.6%, while the number of commitments for the purchase of new dwellings rose 0.8% and the number of commitments for the construction of dwellings rose 0.3%.
■In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 17.8% in May 2012 from 16.8% in April 2012.
So what can we expect from mortgage enquiries heading into the second half of 2012?
Our experience in dealing with brokers daily shows that generally enquiry level and loan numbers are fairly good (within reason depending on the brokerage type) and there is much more positivity out there than there was six months ago. Most of this we assume can be attributed to the drop in interest rates earlier in the year.
Regardless of numbers, with global economics still dim, lending criteria will probably continue to be conservative, and bad credit history will continue to be a big reason we see mortgage applications declined for some time to come.
But it will also still be likely that applicants who present with bad credit may have grounds to dispute their credit rating if the listing is deemed to have been put there unlawfully – and there are a whole host of reasons why this may occur. You can check your client’s credit repair suitability with us any time by calling 1300 667 218. And because of the continuing difficulties faced with Creditors and the need for extensive knowledge of credit reporting and industry legislation, it will remain necessary for those people who want to dispute credit rating mistakes to have on their side a professional credit repair firm to be able to negotiate that removal effectively.
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