Mortgage Index – September 2014


Fewer mortgages were arranged for first home buyers last month than at any time in the past four years according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that loans for first home buyers comprised only 9.5% of all mortgages processed in August – the lowest such figure since June 2010. Of the total $3.9 billion of home loans processed by the company, $324 million were for first home buyers. This contrasts sharply with the $1.5 billion arranged for investors.

First home buying patterns vary across the country. In New South Wales, first home buyers comprised just 3.5% of all mortgages processed. The equivalent figures were 5.5% in Queensland, 9.4% in Victoria, 9.8% in South Australia and 21.0% in Western Australia.

Mark Hewitt, General Manager Sales and Operations says: ‘The long term average for first home buyer loans is around 12% – 15% of the total. We saw overnight slumps from those levels when NSW and QLD withdrew first home buyer grants two years ago. Since then, property prices in Sydney in particular, have been steadily increasing. This represents a double-whammy for first home buyers. It also has important socio-economic implications when, even with interest rates at historic lows, people can’t afford to get on the property ladder.’

The AFG Mortgage Index shows the rate of mortgage growth slowed sharply in August 2014. Figures in the preceding months were around 20% higher than the corresponding months in 2013. August’s figure of $3.9 billion was 9.6% higher than in August 2013. It remains to be seen if this slow-down in growth reflects seasonal factors during the last month of winter, or longer term economic factors, such as the impact of the lack of first home buyers on the total market, concerns about unemployment and global instability.

The number of borrowers choosing to lock in fixed rates increased slightly from 24.0% in July to 24.9% in August, as this part of the home loan market becomes increasingly competitive. Similarly, the proportion of borrowers opting for introductory loans also remained high – 8.9% – relative to the long term average (around 5% of all new home loans), as more borrowers took advantage of special offers.

Loan to value ratios (LVRs), loans expressed as a proportion of property values, continued to nudge upwards in August to 69.5%. This compares to 68.2% in July and 66.6% in June.

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