Mortgage Index – May 2010

Two tier market as investors surge to 60% of all new mortgages

Mortgage sales fell by 15.6% between March and April this year as successive interest rates take hold, according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that the $2.7 billion of mortgages arranged nationally in March fell to $2.3 billion in April. This figure is also 17.5% lower than the $2.8 billion arranged in April 2009.

AFG has 2,100 member brokers nationally and over 10% of the total mortgage market (Source: ABS and AFG data). It’s data is usually strongly indicative of ABS statistics published six weeks later.

NSW saw the largest decline of 19.9% from March sales, with QLD falling 16.4%, SA 15.9%, WA 14% and Victoria the most robust with an 8.7% fall.

AFG also confirms the emergence of a two tier mortgage market, with the proportion of investors surging as sales to owner occupiers decline. Property investors accounted for 36.9% of all mortgages arranged in April, the highest such figure AFG has ever recorded. This compares with 10.2% for first home buyers and 16.3% for up-graders. The balance of new mortgages in April, 36.6%, were arranged for refinancing purposes.

Mark Hewitt, General Manager of Sales and Operations for AFG says: ‘Every month we go through this “will they or won’t they” raise interest rates debate. It’s hard for ordinary families to make the huge financial decision to buy a property when they don’t know what repayments will be in three months time, let alone next year. Investors are somewhat more insulated. They may have the option of rent rises or negative gearing to protect them. This is why we’re seeing the emergence of a two tier mortgage market.’

AFG Mortgage Index shows that Loan to Value Ratios, the value of a home loan expressed as a percentage of the value of a property, was 63.3% in April, compared with 73.7% in April 2009. This reflects the growing proportion of relatively well-funded investors as well as the decline of first home buyers over the past 12 months.

Download – May Mortgage Index – National

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