AFG expecting big drop in first home buyers

While its April 2009 mortgage index revealed that first home buyers comprised 27.7% of all new mortgage sales nationally, AFG expects this numbers to decline over the next few months.

Its latest index revealed that New South Wales benefited the most from the boosted first home owners grant (FHOG), with 33.8% of all mortgages arranged for first time buyers, compared to 27.3% in Victoria, 27.2% in WA, Queensland (27.1%) and South Australia (15.5%).

Director of AFG, Kevin Matthews said: "Whilst the figures for April remain positive, we are expecting the first home buyer numbers to trend strongly downwards in coming months.

"Lenders have recently amended credit policy meaning that many potential first home buyers will no longer qualify for loans without evidence of genuine savings. The vast majority of first home buyer loans fit into this category meaning the effectiveness of the FHOG is diminished substantially."

Matthews said this must be a major concern for government which has provided a deposit guarantee and other measures to support lenders, whilst partially relying on the FHOG to help stimulate the general economy.

"Whilst we support responsible lending we are very concerned about the impact that credit tightening will have on the market going forward," he said.

The AFG index also reported a big jump in fixed rate mortgages - 6.8% of all new mortgages arranged in April 2009 were fixed compared to just 2.5% in February 2009 and 3.7% in March 2009, a nine month high.