Mortgage Index – July 2009


Mortgage sales to first home buyers have fallen by 30.6% since their peak in March according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that 19.5% of all mortgages sold in June were to first home buyers – compared to 28.1% just three months earlier.

AFG was the first organisation to note a significant decline in first home buyer activity in its figures for May. June figures shows that this trend has been sharply magnified as the first home buyer sector returns to levels closer to the long term norm (between 10% and 15%).

Investor confidence continued to grow in June with the proportion of loans to investors rising to 29.0%, up from a low of 24.5% in March. AFG’s long term norm for this sector is in the range of 30% – 35% of all mortgages sold.

Loan to value ratios (LVRs) – loans expressed as a percentage of property values – fell significantly to 66.9%, down from a high of 73.7% in April. This confirms the trend of reducing numbers of first home buyers who usually have low deposits and therefore high LVRs. It is also as a result of lenders tightening their credit polices and reducing the maximum LVRs they will lend to.

Mark Hewitt, General Manager of Sales & Operations says: ‘We’re seeing a number of encouraging signs that the mortgage market is normalising. First home buying, investor activity and LVRs are all reverting towards the long term trend after a period of turmoil. But while confidence is creeping back into the market, the real concern is that over 90% of all home loans are controlled by just four institutions. The lack of consumer choice, and the implications that has for future pricing, is a real obstacle to the functioning of a healthy mortgage market.’

The AFG Mortgage Index also shows an increase in the proportion of buyers opting for fixed rate mortgages from a low of 2.5% in February to 8.3% in June. While more buyers are seeking to lock in low fixed rates, the vast majority of buyers still believe they are better off with variable rate mortgages.

Download – July Mortgage Index – National

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