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