This article is from the Australian Property Journal archive
MORTGAGE sales jumped a massive 40% as first home buyers rushed to the market, according to Australia's largest mortgage broker.
AFG’s Mortgage Index shows total mortgage sales leapt a massive 40% between January and February. The company, which has 10% of the total mortgage market sold $2.6 billion of mortgages in February – the highest volume since November 2007 when it sold $2.7 billion.
First home buyers were strongest in New South Wales and Victoria, comprising 34.5% and 26.8% respectively of all mortgages sold. Nationally, first home buyers comprised 26.1% of sales with strong figures recorded also recorded in Western Australia (25.2%) and to a lesser extent South Australia (15.6%).
High LVR figures – a loan expressed as a proportion of the value of a property – were recorded in both New South Wales (76.6%) and Victoria (75.0%), confirming the impact of first home buyers, who usually have smaller deposits than people trading up to their second or third homes.
But AFG’s general manager of sales and operations Mark Hewitt said the dramatic increase in first home buyers over the past four months is a double edged sword.
“It’s positive in that it underpins the future recovery of mid-level property markets by getting significant numbers of people onto the property ladder. But we’re concerned that if the Government doesn’t announce an extension to the grants fairly soon, we’ll continue to pull demand forward, and will be left staring over a cliff come the end of June,” he continued.
Whilst the surge in first home buyers is positive, experts are warning that there is a significant risk building when rates turn up, and house prices fall.
Earlier this month, Fujitsu Consulting’s Martin North said Australia is mirroring the United States situation before the financial crisis three years ago.
“We expect unemployment to rise to 6% by September 2009, and to 7% by 2010. As a result, we are predicting that mortgage stress will to lift again with a rise to 1.2 million households by September 2009, of which 419,000 will be in severe stress.
“This will more than offset any upside offered by the increased First Time Buyers grants or further rate cuts and we expect to see house prices drift lower over the coming months.” North continued.
Meanwhile the AFG Mortgage Index shows that fixed rate loans fell to an all time low of 2.5% of all new mortgages in February, having peaked at 27% in November 2007.
Hewitt said this suggests that almost all those buying or refinancing properties in February believed that rates have further to fall.
Australian Property Journal
