AFG records strongest February mortgage sales on record but FHBs stay away

AFG mortgage brokers processed $ 2.9 billion worth of mortgages in February, a record figure for the month. 

This was 5.3% higher than for February 2012 ($2.8 billion) and 10.5% up on the next highest February in 2009 ($2.6 billion). 

It follows AFG recording a record January month as well with $2.2 billion worth of mortgages written.

Also in February, fixed rate loans rose in popularity, with 24.1%of new borrowers choosing to lock in rates, compared to 16.3% in January.

The 24.1% figure is the highest recorded by AFG for fixed rates since March 2012, when they accounted for 25.4% of all new home loans.

However, first-home buyer demand remained subdued over the month with demand for mortgages from this key segment near an all-time low in NSW at just 4.5% of the market, up slightly from 4.1% in January. 

First-home buyer activity in Queensland, which slumped after the removal of state grants to buy established homes last year, recovered slightly, rising from 4.5% in December to 6.4% in February. 

Nationally, first-home buyers made up just 12.9% of borrowers who arranged their home loan through an AFG broker, down from 13.2% in January and well down from a recent high of 17.3% in July last year. 

These figures will add impetus to calls for the NSW and Queensland state governments to reinstate the $7,000 first-home owner grant for those buying established homes.

In the diminished first-home buyer market, major lenders made significant inroads and are now responsible for nearly four out of every five new home loans arranged by AFG brokers. 

The AFG Mortgage Index shows the proportion of loans processed for non-major lenders in the first home buyer market fell to 21.8% in February, from 24.8% the month before. 

Non-major lenders have traditionally been stronger in the first home buyer sector than among other types of borrowers such as investors, upgraders and people seeking refinance. 

Non-major market share among first home buyers achieved a high of 33% in May last year.

Mark Hewitt, general manager of sales and operations at AFG, says Australia’s mortgage market has been less competitive than other developed economies for a very long time.

"So it’s of real concern to see the growing dominance of the majors in the only part of the market where there used to be stronger competition. We hope this is something the ACCC take into account in their current deliberations," he says.