NSW leads revival of first-home buyer market - and the fix is on: AFG

The number of first-home buyer market entering the market is up 40% compared with a year ago, with NSW leading the charge, according to mortgage broker AFG. 

The AFG Mortgage Index for October shows that first-home buyers comprised 16.4% of all loans processed by AFG brokers – a 40% increase for this buyer category compared with October 2010, when they comprised 11.8% of the mortgage market. 

The number of first-home buyers who took out loans in October was the greatest number entering the market since September 2009 –when the full First Home Owner Boost Scheme, introduced to support the housing market following the GFC – came to an end. 

First-home buyers were particularly active in NSW, where they represented 21.1% of home loans in October. This buyer segment was also well-represented in Queensland (17.9%) and Western Australia (17.3%). 

The decision by the NSW state government to end first-home buyer stamp duty exemptions and concessions for the purchase of established on January 1, 2012 has most likely contributed to the pick-up in numbers as first-home buyers look to beat the deadline. 

From January 1 the NSW government’s First Home Plus scheme, which provides stamp duty exemptions on homes valued up to $500,000 and concessions on duty for homes valued between $500,000 and $600,000, will come to an end to be replaced by the First Home - New Home Scheme, which provides stamp duty exemptions and concessions for new homes or vacant land intended to be used as the site for a new home.

The November interest rate cut is expected to encourage more first-time home buyers over the coming months, with Real Estate Institute of Australia acting president Pamela Bennett calling it particurlarly good news for this sector of the market.

RateCity CEO Damian Smith says for first-home buyers who haven’t yet entered the market, “lower rates will turn the clock back to 2010 and have an appreciable impact on affordability”. 

BIS Shrapnel chief economist Frank Gelber expects first-home buyers to return to the market in growing numbers following the rate cut and to drive the market over the next year.

Percentage of borrowers fixing their home loans

Source: AFG

In line with mortgage broking franchise Mortgage Choice recording sales of fixed-rate mortgages at a three and half year high in October, AFG also recorded a big jump in fixed-rate mortgages, with sales of the products rising from 16.6% of all loans arranged in September to 20.4% in October, the highest proportion since March 2008.

In July 2011, fixed-rate mortgages comprised only 7.9% of home loans arranged by AFG brokers.

Mark Hewitt, general manager of sales and operations at AFG says: “Buyers are reaping the benefits of one of the most competitive mortgage markets we’ve seen in years. Discounted fixed rate loans appealed to all buyer types, but especially first home buyers and those looking to refinance. 

“We have been slightly surprised with the popularity of fixed rates given it has been generally predicted variable rates would decrease and we would now expect the proportion of fixed rate loans to fall, following the cut in variable rates announced this week,” Hewitt says. 

The October index also showed a growing desire among borrowers to use lenders outside the major banks and Hewitt is hopeful the rate cut will drive further support for a recovery of the second tier lending market. 

Non-majors have seized more market share than at any time over the past 12 months, comprising 21.1% of all home loans. 

Their products are of particular appeal to first-home buyers, where almost 30% of the market is held by non-majors, as well as buyers looking to refinance, where non-majors account for a 21.2% market share.

The percentage of investment loans fell slightly to 35.6% compared with 37.7% in October with investors especially active in NSW (39.2%) and Vic (38.9%) with lower levels of activity in QLD (32.9%), WA (32.2%) and SA (29.8%). 

AFG brokers account for one in 10 mortgages arranged in Australia.