As my readers would know I try to follow AFG’s loan reports every month. They claim to be a good leading indicator for the ABS data that doesn’t appear until 6 weeks later. I have however had a long term issue with their LVR data because it made absolutely no sense. I posted about this point back in March.
While I was checking out their latest report I was amazed to notice that the LVR table has been significantly revised upwards. What is even more amazing however is that AFG seem to have retrospectively updated all of their previous reports with the newer data, yet as far as I can tell haven’t provided an announcement about these revisions.
Here is a screenshot of the LVR chart I took from the May report back in May.
and here is how that chart now appears in the same May report.
Funnily enough they have neglected to update the comments in the reports they have retrospectively updated. Comments specific to the old data still appear in the February report
…. in addition, the AFG Mortgage Index shows that Loan to Value Ratios (LVRs), the value of loans expressed as a percentage of the value of properties, fell to 53.2% in February. This is the most conservative LVR figure AFG has recorded in six years, showing that mortgage buyers borrowed only around half the value of the properties they were buying or refinancing. LVR figures in the long term have tended to be around mid 60%.
The LVR actually went up in February according to the revisions.
So how are we supposed to interpret this statement in the SMH from Tuesday?
Australians are borrowing less as house prices ease, further entrenching the culture of reducing debt set in train by the global financial crisis. People taking out mortgages in June signed up for loans representing a lower percentage of their property’s value than at any time during the previous six months, according to data from Australia’s biggest mortgage broker, AFG.
The average loan to valuation ratio (LVR) was 64.2 per cent, with average LVRs falling in NSW, Victoria, South Australia and the Northern Territory.
Should I believe them this time ?