Smaller loan size holds back housing finance

The problem with the housing finance market is not that people aren't borrowing but they are borrowing a lot less.

Australian Bureau of Statistics housing finance figures published yesterday show that there has been solid growth in the number of dwelling commitments. But a significant reduction in the size of the average loan has held back growth in the value of dwelling commitments.

Lenders wrote A$20.2 billion of owner-occupier and investor mortgages in March 2012 - a fall of 0.5 per cent from the previous month (in seasonally adjusted terms).

The number of dwelling commitments rose 0.3 per cent to 46,275 month-on-month.

The value of mortgages written in March was 5.5 per cent higher than in March last year, while the number of mortgages was up 11 per cent.

The size of the average mortgage has fallen from $303,100 to $284,500 over the 12-month period.

All the evidence suggests that Australian households are continuing to deleverage, so the trend showing up in the ABS figures is likely to continue.