Some 2009 first-home buyers struggling to refinance mortgages due to declining values: JP Morgan

First-home buyers who bought their first homes at the top of the last housing market cycle in 2009, when state government grants were most generous, are now struggling to refinance their loans due to weak equity positions,  according latest Australian Mortgage Industry report prepared by JP Morgan and Digital Finance Analytics.

As interest rates fall and households continue to deleverage, the report says that around 30% of first-time buyers are seeking to refinance their loans, which is "twice the amount, if not more, than other borrowers".

“Secondly, and more worryingly, of those that apply, 15% are being declined – substantially above other categories of borrowers, who are all well below 5%.

“First time buyers bought at the ‘top of the cycle’, with insufficient time between 2009 and now to generate equity in their home, particularly in light of declining house prices relative to the 2009 peak.”

“The end result is that first time buyers not only have a higher proportion of existing loans looking to refinance, but also have a higher proportion of those re-financing applications rejected," says the report.

Many of these buyers took advantage of boosted first-home buyer grants (which tripled to $21,000 for those buying new homes) introduced in the wake of the GFC, which the report says “buoyed housing prices throughout 2009”.