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Mortgage Index June 2014

RECORD INVESTMENT ACTIVITY DRIVES MORTGAGE VOLUMES TO ALL TIME HIGH: MAY FIGURES

Record demand for investment mortgages, comprising 40% of all new home loans, saw AFG, Australia’s largest mortgage broker, process an unprecedented $4.2 billion in mortgages last month. While investor activity has been very strong for most of 2014, May was the first month that AFG has processed 2 out of every 5 new home loans for investors.

The $4.2 billion figure is 17% higher than for May 2013, and 4% above the previous record volume of $4.0 billion processed by AFG in October 2013.

Investment volumes in NSW was the highest in the country last month at 49% – for much of the past year, nearly 1 out of every 2 home loans processed in NSW has been for investment purposes. Also in May, investor demand accounted for 40% of all new home loans in Victoria – the highest figure recorded by AFG in this state. Queensland has also seen a steady rise in investor activity during the past 3 months from 32% of all new home loans in February to 39% in May. Investor activity accounted for 34% of mortgage volumes in South Australia and 31% in Western Australia last month.

Kevin Matthews, Director of AFG says: ‘Despite the fall in consumer confidence caused by the recent federal budget, low and stable interest rates are a key factor in encouraging borrowers to participate in the real estate market. Recent independent research shows that one in two borrowers are now using mortgage brokers, which no doubt also contributed to our record result.’

First home buyer activity across the country held steady at 10%, although a wide disparity remains between states where grants are provided for first home buyers, such as WA, where they comprise 22% of all new home loans, and states where there are no grants, such as NSW, where first home buyers comprise just 3.5%.

Non-major lenders recaptured some of the gains made by major lenders last month, taking 25% of all new home loans. Most of these gains were in the first home buyer market where the share of non-major lenders rose to 30%.

Fixed rate loans comprised 24% of all mortgages processed last month – for most of the year, fixed rates have remained consistent around this level.

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