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Two in five new mortgages in June were arranged for borrowers choosing to refinance their properties, according to AFG, Australia’s largest mortgage broker. The AFG Mortgage Index shows that, at 39.1%, borrowers looking to refinance their home loans comprised a higher proportion of new mortgages than any other type. This level represents a twelve month high – the last time so many borrowers were refinancing was in July 2011.
At the same time, the popularity of fixed rate home loans has fallen to its lowest point since September last year. Fixed rate loans peaked at 25.4% of all home loans arranged in March this year – the highest such level AFG has ever recorded. Since then, there has been a steady decrease in borrowers looking to fix rates, and in June 16.5% opted for a fixed rate mortgage.
Mark Hewitt, General Manager of Sales and Operations at AFG says: ‘Refinancing is very strong as borrowers take advantage of a more competitive market to secure a better deal. It’s significant that, as we begin a new financial year, the vast majority of borrowers are opting not to lock in an interest rate. Most see a period of stable or even softer rates for the foreseeable future.’
The AFG Mortgage Index shows that despite economic volatility of the past 12 months, the national mortgage market has been remarkably consistent in a number of respects. The average mortgage size rose 2.3% over the year, from $384k to $393k, property investment held steady at just over one third of all new mortgages processed, and there was a slight increase in the proportion of first home buyers from 13% to 15.6%.
But different states show marked variations. NSW remains the most active among investors, attracting 43% of all home loans arranged there. However first home buyers declined significantly in NSW during the financial year from 15.5% of all mortgages to 10.9%. By contrast, WA lags behind all other states in terms of investment (which comprises just 30.2% of new home loans there), but first home buying activity has ramped up from 13.3% to 22.2% in the past 12 months, making it the strongest state for first home buyers.
Download – July Mortgage Index – National