Mortgage Index – April 2009

FIRST HOME BUYER STRENGTH CONCEALS LENDING SQUEEZE: LATEST FIGURES

Continued strength in first home buying delivered a record month of mortgage sales in March according to AFG, Australia’s largest mortgage broker. The AFG Mortgage Index shows the company arranged a record $800 million of mortgages for first home buyers, comprising 28% of all new mortgages in March. This pushed total sales for the company to $3.1 billion – it’s best month ever, 18% ahead of a boom February and 48% higher than for March 2008.

First home buyers were most active in New South Wales, where one third of all mortgages were arranged for them. First home buying was almost as active in Victoria (29% of all new home loans), with Queensland on 27%, WA on 25% and South Australia on 20. First home buyer participation has emerged from historically lows when mortgage rates peaked at 9.6% in August 2008.

Disturbingly, the rebound in Australia’s mortgage market could quickly turn to a hangover if government grants are withdrawn at the end of June.

Mark Hewitt, General Manager Sales and Operations says: “The lending landscape has changed dramatically over the past 12 months. There are now far fewer lenders with the demise of the 2nd tier and some of the major banks, who now dominate the market, have reduced LVRs as well as imposing other tougher conditions on borrowers.

“The boom we are experiencing masks growing evidence of credit tightening by major lenders. The truth is that we’re seeing a big reduction in the proportion of loans that are approved and eventually settle. Once the boost to the first home buyer grants end in June, we face the possibility of a bleak mortgage winter.

“Consumer confidence is critical and the boost to the grant has arguably been the government’s most successful stimulus policy. The resilience of Australia’s housing market, which has also been seen in positive house price data, is the one big ray of sunshine in our economy. Robust housing demand is critical if we are to bring the construction industry back online producing much-needed new supply and protecting jobs.

“The major lenders have benefited from generous government support measures and they must come to the part by continuing to provide home owners with access to credit on reasonable terms.” Hewitt said.

AFG Mortgage Index also shows the proportion of property investors has been falling for the past six months from an average of 31% of all loans in September 2008 to a low of 24.5% in March. Part of this fall may be technical, due to the increased proportion of first home buyers, but tougher lending is also impacting on the ability of property investors to borrow.

Fixed rate mortgages moved up from an all time low of 2.5% in February to 3.7% last month, signalling that more people are beginning to see the rate-cut cycle as coming to 2 an end. This is a measure that will be watched closely as we approach the bottom of the interest rate cycle.

Download – April Mortgage Index – National

Mortgage Index – March 2009

BOOM MONTH FOR MORTGAGES AS FIRST HOME BUYERS RUSH TO MEET DEADLINE

February was a boom month for mortgage sales as first home buyers rushed to take advantage of grants which come to an end in June, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that total mortgage sales leapt a massive 40% between January and February this year, compared to the usual 20% increase between those two months. The company, which has 10% of the total mortgage market (Source: ABS and AFG statistics) sold $2.6 billion of mortgages in February – the highest volume since November 2007 when it sold $2.7 billion.

First home buyers were strongest in New South Wales and Victoria, where they comprised 34.5% and 26.8% of all mortgages sold. These high figures reflect the relative weakness of the upper end of property markets, as well as the surge of sales at entry level. Nationally, first home buyers comprised 26.1% of all mortgages sold, with strong figures recorded also recorded in Western Australia (25.2%) and to a lesser extent South Australia (15.6%).

High LVR figures – a loan expressed as a proportion of the value of a property – were recorded in both New South Wales (76.6%) and Victoria (75.0%), confirming the impact of first home buyers, who usually have smaller deposits than people trading up to their second or third homes.

Mark Hewitt, General Manager Sales and Operations says: ‘The dramatic increase we’ve seen in first home buyers over the past four months is a double edged sword. It’s positive in that it underpins the future recovery of mid-level property markets by getting significant numbers of people onto the property ladder. But we’re concerned that if the Government doesn’t announce an extension to the grants fairly soon, we’ll continue to pull demand forward, and will be left staring over a cliff come the end of June.’

AFG Mortgage Index also shows that fixed rate loans fell to an all time low of 2.5% of all new mortgages in February, having peaked at 27% in November 2007. This suggests that almost all those buying or refinancing properties in February believed that rates have further to fall.

Download – March Mortgage Index – National

Mortgage Index – February 2009

Mortgage sales to first time home buyers leaped to an all time high of 25.8% of all mortgages arranged in January, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the proportion of first time home buyers is now more than double the 11.6% recorded six months ago in July 2008. First time buyers were in greatest evidence in New South Wales (30.5%) followed by WA (26.7%), Victoria (25.3%) and Queensland (24.7%).

AFG first noted a significant surge in first home buyers in its early December Mortgage Index – a trend confirmed by ABS in its official data published on 14 January 2009. The surge is now in its third month and shows no signs of stopping.

Loan to Value Ratios (LVRs), which have been rising steadily over the past twelve months, also hit an all time high of 72.5% in January, up from 62.7% in January 2008. An LVR, which expresses the average mortgage as a proportion of the average house price, typically rises when property prices fall, and when people incorporate expensive personal debt, such as credit card debt, when refinancing. LVRs also rise for a positive reason when more first time buyers, with smaller deposits, enter the housing market.

Mark Hewitt, General Manager of Sales and Operations says: “Younger people with reasonably secure jobs have become an important force in the property market during the past few months. For many of them it’s a case of ‘what recession?’ While other parts of the market are suffering, for them the opportunities are unprecedented – generous government hand-outs, soft prices and interest rates which are now at a thirty year low.”

AFG Mortgage Index also shows that refinancing is down to a 12 month low of 34.7% of all mortgages, suggesting that more people are hunkering down with their current lender as interest rates fall.

Overall sales of mortgages fell from $2.2 billion in December to $1.9 billion in January. While January sales have tended to be higher than December in the past – in January 2008 by 2.8% – last month’s slew of bad economic news saw more buyers staying at home. However yesterday’s rate cut announced by RBA, and $42 billion Government spending package is expected to stimulate increased activity in February and March.

AFG has 10% of the total mortgage market (Source: ABS and AFG statistics).

Download – February Mortgage Index – National

Mortgage Index – January 2009

BOUNCE IN FIXED HOME LOANS AS BORROWERS LOCK IN LOW RATES : LATEST FIGURES

Increasing numbers of borrowers are opting to lock in low interest rates according to figures published today by AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the proportion of fixed rates bounced up from an all time low of 3.2% in November to 5.7% in December 2008 – an increase of 78%. This is the first time the proportion of fixed home loans, relative to variable loans, has increased since February 2008, as property buyers take advantage of the low fixed rates being offered by some banks.

AFG Mortgage Index shows that mortgage sales in December were stronger than expected, with an increase of 11% in terms of volume of loans arranged compared to December 2007. This was the first month in the whole of 2008 during which mortgage sales out-performed the same month the previous year. The reason for the relatively strong performance was a continued robust demand of first home buyers (21.2%) and continuing strong activity among owners looking to refinance their properties (37.2%).

Mark Hewitt, General Manager Sales and Operations of AFG says: “It would be premature to call a turn-around in the mortgage market based on a single month’s performance, but December figures were an encouraging sign. There is a traditional softening in mortgage sales at this time of year as people enjoy the festive season, but mortgage sales held up more strongly than expected. We expect to see the number of fixed rate loans increase over the next few months as many mortgage holders move to lock in low rates, and first time buyers continue to take advantage of the financial incentives available to them.”

First home buyer demand continued strongly in most states with an increased proportion of first home buyers during December in New South Wales if 29.2% (up from 27.0% in November) and Western Australia of 19.1% (up from 18.1% in November).

AFG has a 10% of the total mortgage market (Source: ABS and AFG statistics).

Download – January Mortgage Index – National

Mortgage Index – December 2008

THEY’RE BACK: FIRST HOME BUYERS UP 120% IN THREE MONTHS – LATEST MORTGAGE FIGURES

Having steered clear of the property market for most of the year, first home buyers are storming back according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that in November 2008 the company arranged $474 million in home loans for first time buyers – or 22% of all new mortgages. This compares to the $215 million it arranged for first timers only three months ago in August – a 120% increase in volume.

AFG has ten percent of the national mortgage market (Source: ABS and AFG data) suggesting that in November, first home buyers accounted for a total of about $4.7 billion of property purchases nationally.

For the first six months of 2008, volumes of home loans arranged for first home buyers averaged $215 million. But the past three months has seen this figure soar, boosting AFG’s total mortgage sales figures to twelve month highs of $2.4 billion.

Mark Hewitt, General Manager Sales and Operations at AFG says: ‘In many ways there has never been a better time to buy a first home. Mortgage repayments are significantly lower than they’ve been for a long time and may go even lower. Property prices in many areas have become more affordable. And buyers are keen to take advantage of generous government incentives while they’re still on the table. This influx of first home buyers is good news, not only for the lower end, but for the medium term health of the property market as a whole.”

Queensland has seen the biggest surge in first home buyers with loan volumes increasing 152% in the past three months (from $57 million to $144 million). Victoria has seen a 120% increase (from $43 million to $95 million) and New South Wales rose 113% from $60 million to $128 million. South Australia rose 107% from $14 million to $29 million and even Western Australia, which has had a tough first home market, saw an 89% increase between August and November ($39 million to $74 million).

AFG Mortgage Index also shows a rise in Loan Value Ratios (LVRs) – the value of a loan expressed as a percentage of a property value. LVRs have increased 10.4% in the past year from a national average of 65.2% to a new high of 72%. The reasons for this are the impact of falling property values in the past 12 months, and the increase in the proportion of first home borrowers, who typically take out 95% home loans.

Fixed home loans are down to a record low of 3.2% of all new home loans, from a high of 25.3% in February, as buyers anticipate a lower rate regime.

Download – December Mortgage Index – National

Mortgage Index – November 2008

FIRST TIME BUYERS AND FLIGHT TO BIG BANKS BOOST OCTOBER MORTGAGE SALES 18% – LATEST FIGURES

Mortgage sales rose by 18% in October as a double whammy of record numbers of first time buyers entered the market, and record numbers of existing owners refinanced their properties, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the number of first time buyers increased by 60% from the middle of the year as lower rates, more affordable property and first time buyer incentives took effect. Meantime, the proportion of mortgage sales to property owners opting to refinance peaked at an all time high of 40.9% as property buyers voted with their wallets in favour of lower rates offered by the major banks.

AFG Mortgage Index also shows most property buyers in October expected further rate cuts, with a record high of 51.2% opting for standard variable mortgages. Fixed rate mortgages, which peaked in popularity last November at 27.3% now comprise only 4.5% of all new mortgages sold.

The national average mortgage size also created a record $353k – the first time it has breached the $350k mark. In line with this, Loan to Value Ratios, the value of loans expressed as a percentage of property values, also rose to an average high of 68.7% as buyers took advantage of the lower rate regime.

Mark Hewitt, General Manager of Sales and Operations at AFG says: “Despite the turmoil on global markets, these are good times to be a first time buyer. Property prices are more attractive than they have been for a while, Government incentives are more generous than ever before, and rates are on their way down. We’re also experiencing an unprecedented level of refinancing as buyers abandon second tier lenders for the major banks, who now control 89% of the mortgage market.”

Strong growth in mortgage sales was reported across most states – South Australia (39.5%), Victoria (25.1%), Western Australia (22.5%) and New South Wales (19%). Queensland recorded only a 4.5% increase in sales, but it has been less badly affected in previous months than other states. AFG has 10% of the national mortgage market.

Download – November Mortgage Index – National

Mortgage Index – October 2008

SURPRISE RECOVERY IN SEPTEMBER– LATEST MORTGAGE FIGURES

Despite turmoil on financial markets during September, sales of mortgages across Australia recovered by 10.2% on the previous month’s low figure, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the states benefiting most from the recovery were Queensland, where mortgage sales increased by 17.9% and New South Wales which saw a 16.1% month on month growth. Western Australia and Victoria saw sales lift by 5.9% and 4.2% respectively.

The recovery can be partly attributed to August buyers holding off till September to confirm the first rate movement downwards, which had been the source of speculation for weeks.

While September sales were lower than for the same month last year by 13.9%, this is a less worrying figure than for August, which saw sales decline by 37% on August 2007.

Malcolm Watkins, Executive Director of AFG says: “We’d like to see two things happen to shore up this bounce. The first would be for the RBA to pass on a 0.5% rate cut next week.

“The second is for more initiatives like the recent $4bn investment by the RBA in AAArated Residential Mortgage-Backed Securities. Whilst it’s a good start to alleviate liquidity, the $4bn is less than two month’s worth of mortgage sales by our company – and we’re only one of many participants.

“It’s critical that the funding arm is available to smaller lenders, including non-bank lenders and building societies, whose ability to participate has been clamped off due to spiralling funding costs. This will encourage a wider choice of home loans and exert pressure on the majors to pass on more of any future rates cuts. Lack of competition ultimately means consumers will suffer at the expense of shareholders.”

AFG Mortgage Index shows that through all the volatility of the past 12 months, average mortgage sizes and Loan to Value ratios have hardly changed. On a national basis, the average new mortgage size is $337k, compared to $329k in September 2007 – a 2.4% increase. Mortgage sizes grew most in South Australia (by 8.3% from $253k to $274k) and New South Wales (by 4.7% from $382k to $400k), but held steady in most other states.

Meanwhile Loan to Value Ratios (LVRs), the value of a new loan expressed as a proportion of the value of a house, have also held steady – from 66.3% in September 2007 to 65.9% in September 2008. This suggests that most new buyers are not overstretching themselves to buy property. LVRs fell in Queensland, South Australia and Victoria but increased in WA by 10.9% and NSW by 4.3%.

Download – October Mortgage Index – National

Mortgage Index – September 2008

RBA MINUTES KEEP BUYERS OUT OF MARKET – LATEST MORTGAGE FIGURES

Minutes released by the RBA in early August, suggesting a rate cut would be made in September, encouraged property buyers to fence sit during August, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that mortgage sales fell by 20% in August as volumes slipped below $2 billion during the month for the first time since December 2006. This followed a relatively robust month for sales in July.

AFG has 10% of the national mortgage market and its figures are usually strongly indicative of definitive statistics produced six weeks later by the ABS.

In the past, sales of mortgages have traditionally increased by 10% – 12% in August compared to July. This year’s reversal goes against the seasonal trend.

Mark Hewitt, General Manager of Sales & Operations says: “Our members have been speaking to a lot of potential borrowers who were waiting to see what happens with rates. Yesterday’s cut is a welcome signal that the rate cycle is on the way down and it was great that the banks have passed the full reduction on. But borrowers have suffered death by a thousand cuts over the last 7 years of rate rises, and it will take more than one 25 basis point drop to see confidence return to property markets.

“What the RBA says about the future of rates will have a significant bearing on the next few months. Releasing its minutes is a positive in terms of keeping the public informed, however flagging future rate falls may contribute to a slower than hoped-for recovery due to the fence sitting mentality of investors and consumers.”

Across the country, New South Wales was the state most affected by the sales slide, with a 31% fall in sales for August compared to July. Western Australia saw sales fall by 19.9%, month on month, with Victoria recording a 18.4% fall. Queensland was least affected, with sales falling by 10.8%.

AFG Mortgage Index also illustrates the high expectations of consumers about future rate cuts, with only 4.9% of new mortgage buyers opting for fixed rate mortgages. This compares to a peak of 25.3% for fixed rate mortgages in February.

Property investors have remained constant, comprising 30% of new mortgage buyers, suggesting that long term confidence in the underlying value of property markets remains strong.

Download – September 2008 Mortgage Index – National

Mortgage Index – August 2008

FIRMER AFG MORTGAGE SALES DESPITE POOR CONSUMER SENTIMENT: JULY FIGURES

AFG mortgage sales figures were 17% higher in July than June suggesting an increase in market share, according to Australia’s largest mortgage broker. AFG Mortgage Index shows that the company arranged $2.4 billion of mortgages in July compared with $2.0 billion in June. In previous months, AFG has had an estimated 10% of the national mortgage market (Source ABS and AFG data).

On an annual comparative basis, July sales were 14.1% lower than in July 2007, but this yardstick suggests a bottoming out, after comparative declines for June 2008 of 22% and May 2008 of 28% when measured against the same months in 2007.

Malcolm Watkins, Executive Director of AFG says: “Consumer confidence is at an all time low, although in recent days there has been some encouraging signs with lower crude oil prices and the prospect of an RBA cash rate cut in the not too distant future. However consumers will only benefit if these savings are passed on. The official RBA rate may no longer be the benchmark for home loan pricing, rather competitive tension will determine delivery rates to borrowers. Only robust competition between lenders will ensure that borrowers benefit, the big 5 banks now account for a far greater share of the market, compared with a year ago. We’d like to see the Government act quickly to stimulate genuine competition in the sector.”

AFG Mortgage Index also shows that refinancing hit a record high, with 40.8% of all new mortgages being for refinancing purposes. Much of this refinancing marks a move away from non-bank lenders to the Big Four banks, underlining AFG’s call to the Government to stimulate competition in the sector.

AFG Mortgage Index shows the proportion of Fixed Rate mortgages also fell to the lowest on record – 7.9% – compared with a high of 25.3% just 5 months ago, as expectations about the next rate movements change.

Download – August 2008 Mortgage Index – National

 

Mortgage Index – July 2008

Upper end resilient as mortgage ‘recession’ confirmed

The national slowdown in mortgage sales continued during June, with the volume of mortgages sold by AFG, Australia’s largest mortgage broker, declining 9.2% on figures for May, and 22.0% compared to June 2007.AFG sold 5,939 mortgages in June 2008, totalling $2 billion in finance, compared with 8,195 mortgages and $2.6 billion in finance in June 2007.

AFG Mortgage Index shows that mortgage sales nationally have now experienced two successive quarters of negative growth – the definition of an economic recession. AFG is Australia’s biggest mortgage broker with 10% of the national market (Source: AFG and ABS statistics).

Also during the past year the average mortgage size has increased from $317k in June 2007 to $341k last month – a rise of 7.5%. Biggest mortgage size increases have been in South Australia (13.5%), Queensland (11.7%) and New South Wales (7.6%), with average mortgage sizes growing by 6.1% in Victoria and holding steady in WA.

Mark Hewitt, General Manager of Sales & Operations says: “At first glance it may seem strange for an industry hit by rate rises to see average mortgage sizes increasing. But what these figures show us is that many people who would normally be taking out smaller or medium size mortgages just can’t afford to. The upper end of the market is proving the most resilient – i.e. buyers with significant equity in their homes or investment properties.”

AFG Mortgage Index also shows the proportion of buyers taking out fixed rate loans has fallen to 11.5% – the lowest figure in nearly three years. Fixed rate loans peaked in November 2007 at 27.3% of all new home loans. The vast majority of new buyers would now seem to think that the future of rates is steady or down, rather than up.

Refinancing through mortgage brokers continues at a relatively high rate of 36.5% of all new mortgages as property buyers continue to seek more competitive deals.

Download July Mortgage Index – National