Quarter of new borrowers are first homebuyers

First homebuyers continue to storm their way into the mortgage market, following increased government assistance and tumbling interest rates.

Coming just days after the RBA cut rates to just 3.25% - the lowest they have been in nearly 45 years - the latest AFG Mortgage Index showed that more than a quarter (approximately 25.8%) of all mortgages arranged in January 2009 by AFG brokers were for first time homebuyers.

This is more than double the 11.6% recorded six months ago in July 2008 by the index.

First time buyers were in greatest evidence in New South Wales (30.5%) followed by WA (26.7%), Victoria (25.3%) and Queensland (24.7%).

AFG first noted a significant surge in first homebuyers in its early December Mortgage Index - a trend confirmed by ABS in its official data published on 14 January 2009.

The index also reported LVRs continue to rise, hitting an all time high of 72.5% in January, up from 62.7% in January 2008.

While falling property prices and borrowers using expensive personal debt when refinancing were factors in increasing LVRs, on the positive side AFG said the increase also reflected the influx of first time buyers, with smaller deposits, entering the housing market.

Mark Hewitt, GM for sales and operations at AFG commented: "Younger people with reasonably secure jobs have become an important force in the property market during the past few months. For many of them it's a case of 'what recession?'"