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The Reserve Bank is under increasing pressure to keep the official cash rate on hold as evidence has emerged that the mortgage market has stalled.
The latest figures from AFG have revealed a 47 per cent slump in mortgage activity in January in comparison to September last year.
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According to the mortgage broker’s monthly Mortgage Index, the company arranged $1.5 billion of mortgages in January – a far cry from the $2.9 billion it arranged in September.
The $1.5 billion figure for January is the worst figure the company has posted in any one month since January 2005.
In the past four months, mortgage sales have fallen steadily as first home buyers have exited the market, and upgraders have reacted to three rate rises in quick succession by freezing further borrowing.
According to AFG’s managing director Brett McKeon, a further rate rise could "cripple" the already weak mortgage market.
“People are not moving or upgrading their family homes - they’ve slammed the brakes on borrowing,” Mr McKeon said.
“We’ve seen a lot of data recently about rising house prices and increasing consumer confidence, all of which would suggest buoyant property markets. But the opposite is the case. The drip feed of rate rises is like water torture – people are anxious about when the next one is coming and how big it will be.
“Uncertainty about the future of rates is draining confidence out of the market.”
According to the Index, refinancing edged higher again in January to comprise 36.2 per cent of all new mortgages.
Property investors were the only group of buyers to hold steady, comprising about a third of all new mortgages arranged.
