Mortgage Index – December 2008


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