Mortgage Index – April 2009


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Disturbingly, the rebound in Australia’s mortgage market could quickly turn to a hangover if government grants are withdrawn at the end of June.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

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