Average loan falls as house prices drop

‘‘I think the recent dips are showing us that the property market has transitioned into a buyer’s market.’’

Stuart Baxter

Centrix analytics general manager

The size of the average home loan dropped roughly $25,000 between December and March, according to credit bureau Centrix.

Centrix analytics general manager Stuart Baxter said the reduction, which equated to a 6.8% drop, happened in line with falling house prices.

The amount lent as home loans overall also shrank by almost a third in March, compared to the same month the year before.

‘‘I think the recent dips are showing us that the property market has transitioned into a buyer’s market,’’ Baxter said.

‘‘Asking prices have dropped in many regions, which tends to happen in a buyer’s market.’’

The demand for mortgages fell by 12% year-on-year in April. Baxter said this, and the 30% fall in overall home loan lending, was down to the market tightening and the lingering impact of Credit Contracts and Consumer Finance Act (CCCFA) changes that had resulted in more borrowers being rejected by lenders.

‘‘Late last year the conversion rate on home loan applications were around 40% – so 40% of them were successful.

‘‘That has now dropped to 34% [in the year to March], which doesn’t sound like a huge drop, but it actually is quite significant.’’

This equated to 15% fewer buyers competing in the market.

Despite the Government considering changes to the CCCFA to make it less prohibitive for home buyers, banks say the proposed tweaks do not go far enough.

The average mortgage in December was $376,000, which fell to $351,000 in March.

The average size of home loans to first-home buyers this year bucked the trend and went up from $500,000 in December to $531,000 in March.

Baxter said it was not obvious why this increase had occurred, and it could be down to house prices at the lower end of the market holding up better during the downturn.

He said the average first-home buyer loan amount did jump around more month to month because they made up only 20% of all loans.