First home buyer numbers diminish - record lows!

Despite a low-cash-rate environment, the number of first home buyers taking out home loans is diminishing.

New mortgage numbers dip

Fewer mortgages for new buyers were processed last month than at any period over the last four years, according to the Australian Finance Group’s (AFG) Mortgage Index.

“The long-term average for first home buyer loans is around 12-15 percent of the total [number of mortgages],” explained Mark Hewitt, AFG General Manager for Sales and Operations.

However in August, the proportion of first home buyer mortgages was noticeably lower than the long-term average, holding at 9.5 percent. The last time the proportion was this low was in June 2010.

What are the loan figures?

During August, AFG processed $3.9 billion home loans. Of this, $324 million was for first-time buyers.

While the Reserve Bank of Australia (RBA) board’s September 2 decision to maintain the cash rate at 2.5 percent is a plus for property buyers of all stripes, it’s clearly not enough for would-be buyers to get their foot on the property ladder in many instances.

This could be due to a number of factors, such as affordability in particular areas and intense demand for certain kinds of property in burgeoning capital cities.

Fortunately, Glenn Stevens, RBA Governor, has indicated interest rates should remain stable for some time, with monetary policy remaining “accommodative” for economic growth.

But what will happen to first-time buyers struggling to save enough in their savings accounts for home deposits?

Overall slow growth

According to the AFG, it’s not just first-time buyer growth that’s slowing.

Overall mortgage growth has decreased “sharply” during August — even though the figure was 9.6 percent higher in August 2014 than during the same month last year.

In the months leading up to August this year, mortgage figures were roughly 20 percent higher.

The AFG is unsure exactly what’s causing this dramatic slowdown, though there are murmurs it could be due to seasonal factors. Home selling is popular in spring, but can be less so in winter, which may have caused the sharp drop in mortgage values.

Other factors that can influence mortgage figures include worries about global instability and unemployment.

What are the most popular loans?

In terms of the home loans being taken out, there has been a slight increase in the number of fixed loans. 

Month-on-month to August, fixed-rate loans increased from 24 percent of overall loans to 24.9 percent. According to the AFG, this section of the mortgage market is becoming “increasingly competitive”.

Use a home loan calculator if you want to establish your borrowing capacity, whether on a fixed or variable rate.

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