First-home buyers in WA and Victoria drive number of mortgages arranged by AFG brokers to five year high

Larry SchlesingerDecember 8, 2020

Australia’s largest mortgage broker AFG has bucked the national trend of slow mortgage growth with its loan writers processing the highest number of mortgages in July since July 2007.

AFG brokers processed 7,027 home loans over July worth a combined $2.73 billion.

This was also a 20% increase in value terms compared to the $2.29 billion processed by AFG brokers for the same month in 2011.

Figures released by RBA earlier this week showed just a 0.3% growth in mortgage lending in June with annualised growth at its lowest level since the 1970s.

AFG attributed its mortgage growth in part to the rise in the proportion of loans processed for first-home buyers, which increased from 15.6% of all mortgages arranged in June to 17.3% in July - the highest figure for first-home buyers since August 2010.

First-home buyers were strongest in WA, where they represented almost a quarter of all new mortgages arranged (22.7%), and were also well represented in Victoria (21.7%).

They were less in evidence in NSW (14.4%), QLD (13.8%) and SA (9.6%).

Consistent with the increase of first home buyers, the proportion of introductory loans arranged spiked from 2.9% in June to 5.4% in July.

In addition, overall LVRs – loans as a proportion of home values - increased slightly from 66.9% to 67.7% "as would be expected given that first-home buyers typically borrow most of the value of their new property".

Mark Hewitt, general manager of sales and operations at AFG says: ‘Low interest rates, soft property prices and escalating rents create a powerful cocktail of incentives to get people into the property market.

“This is especially true in WA, where these factors are probably at their strongest.’

The AFG Mortgage Index also shows non-major bank lenders gained ground among those borrowers refinancing existing loans - from 22.9% of market share in June to 26.7% in July.

Fixed rate loans held steady at16% of all loans processed, as most new borrowers opted to stick with variable rates.

Figures released by Mortgage Choice show a marked drop in demand for fixed rate loans from 18% to 15% as demand for variable rate home loans reached an eleventh month high due to speculation of another rate cut in coming months.

 “Demand for ongoing discount rate loans where the variable rate is reduced usually in return for an annual fee, rose by four percentage points to 44%, while interest in basic variable rate loans, which often have a low interest rate in exchange for fewer loan features, increased by one percentage point to 20% of all new loans,” said Mortgage Choice spokesperson Belinda Williamson.

“Borrowers’ interest in standard variable rate loans fell last month to 18% from 19%, as did the appetite for fixed rate loans, which dropped considerably to 15% from 18%.”

Western Australia was the only state to go against the grain and report a drop in variable rate demand, which fell to 81% in July from 86% in June.

The average increase of variable rate uptake across the remaining states was a rise of 3.75 percentage points.

“The vast majority of borrowers are feeling as confident about variable interest rate movements now as they did back in August 2011, a time when borrowers had experienced nine consecutive months of steady interest rates, which was followed by rate cuts,” says Williamson

For tips on refinancing and trying to navigate the current mortgage rates riddle, watch Property Observer's recent webinar: How smart property buyers and investors should approach refinancing in the current environment

 

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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