New home mortgage sales sink to a 10 year low

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The number of Australians borrowing to buy a home plunges to its lowest level in 10 years, casting a shadow on the recovery of the property market according to a new report.

The number of owner- occupier mortgages sold in 2010 was the lowest since 2000, hitting just 575,000 mortgages, a sharp decline from the 777,000 mortgages taken out in 2007.

Datamonitor says record low housing affordability driven by higher property prices and recently raised interest rates will continue to affect the market.

“Gradually worsening affordability has priced some prospective buyers out of the market, with younger buyers and first time buyers the most affected”, says Petter Ingemarsson, senior analyst at Datamonitor and author of the report.

Since 2000, the average housing lending commitment has more than doubled from $133,000 to $286,000 in 2010, outstripping rises in average incomes. The widespread expectation of further interest rate hikes, at least 0.25% rise this year, has deterred prospective customers.

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