Mortgage Index – May 2009

Sales of fixed rate mortgages bounced to a nine month high in April as more borrowers see the current cycle of rate cuts coming to an end according to AFG, Australia’s largest mortgage broker. The AFG Mortgage Index shows that 6.8% of all new mortgages arranged in April were fixed rate, compared to just 2.5% in February and 3.7% in March. While figures currently remain in the single digits, the change represents a discernable shift in consumer expectations of future rate movements.

The AFG Mortgage Index shows that mortgage sales across the country continue to be driven by the boom as first home buyers rush to take advantage of the Government First Home Owners Grant (FHOG) before it expires at the end of June. First home buyers comprised 27.7% of all new mortgage sales nationally, with New South Wales benefiting ahead of all other states – 33.8% compared to 27.3% in Victoria, 27.2% in WA, 27.1% in Queensland and 15.5% in South Australia.

Kevin Matthews, Director of AFG says: “Whilst the figures for April remain positive we are expecting the first home buyer numbers to trend strongly downwards in coming months. Lenders have recently amended credit policy meaning that many potential first home buyers will no longer qualify for loans without evidence of genuine savings. The vast majority of first home buyer loans fit into this category meaning the effectiveness of the FHOG is diminished substantially. This must be a major concern for government which has provided a deposit guarantee and other measures to support lenders, whilst partially relying on the FHOG to help stimulate the general economy. Whilst we support responsible lending we are very concerned about the impact that credit tightening will have on the market going forward”

AFG Mortgage Index shows that property investors continue to be cautious, with 25.4% of all new mortgages arranged for investors – down from the last peak of 31.4% in September, and a longer term trend of approximately 30% of the market. Investor confidence is highest in Queensland (27.1%) New South Wales (26.9%) and WA (25.6%) and lower in South Australia (23.1%) and Victoria (22.5%).

Loan to Value Ratios (LVRs) continue at their highest level on record (73.7%), 8% higher than a year ago, given the influx of first home buyers with small deposits into the market.

Download – May Mortgage Index – National