First home buyers in record market share

THE first home buyer share of the mortgage market has risen to a seven-year high in response to big rate cuts and generous grants to new home owners.
Some 11,665 first-time borrowers made up 23.6 per cent of the home borrowing market in November, the highest proportion since January 2002, a big jump from October's 19.5 per cent share, official data showed.

The Australian Bureau of Statistics (ABS) data also showed that overall home loan approvals rose for the second straight month in November while the popularity of fixed-rate loans dived to a record low.

The number of housing finance commitments for owner-occupiers rose 1.3 per cent in November, seasonally adjusted.

This followed October's 1.4 per cent gain, which reversed eight consecutive monthly falls.

Commonwealth Bank senior economist Michael Workman said aggressive rate cuts and the Federal Government's boost to first-home buyer grants had restored housing sector confidence.

"It is indicating that the interest rate cuts and also the first home buyers scheme have had quite a strong impact on lending,'' Mr Workman said.

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No chances of prices increasing now, people keep forgetting that affordability is the main concern here, if buyers want a house, but can't afford it, what's the use of deman...

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Zak of Parramatta "The steep declines are over."

On an annual basis, mortgage commitments have fallen by a quarter, with 49,192 mortgages taken up in November compared with 65,495 a year earlier.

In October, the Federal Government doubled the first-home buyer grant for established dwellings to $14,000, and tripled the subsidy for newly built homes to $21,000.

St George Bank economist Marie Tasevski said the housing finance take-up was likely to improve in coming months as borrowers responded to the increased first-home buyer grant and recent rate cuts.

New dwelling mortgage commitments climbed by a hefty 9.8 per cent in November, while established home lending rose by 1.1 per cent, the ABS data showed.

The mortgage market also boosted by the Reserve Bank of Australia's (RBA) decision to slash interest rates by one percentage point in October and by 75 basis points in November.

Interest rates were slashed again in December, by one percentage point, taking the cash rate to a six and a half year low of 4.25 per cent.

Expectations of more interest rate cuts appear to have affected the popularity of fixed-rate home loans, which fell to a 2.5 per cent market share in November - the lowest proportion since the ABS started collecting this data in 1991.

ANZ economist Alex Joiner said that while the rate cuts were enticing owner-occupiers and first home buyers, a recovery in the home building sector was still some way off.

"Confidence in the property market is still shaky and economic uncertainty is high," he said.

The value of lending for investor housing fell by 6.1 per cent in November, while the number of loan commitments to build new dwellings dropped by 0.3 per cent.

NSW enjoyed a strong recovery in home loans during November, with the 5.8 per cent rise in housing finance for owner-occupiers reversing nine consecutive months of decline.

Only Tasmania had a bigger monthly increase of 6.5 per cent.

The story was different in the former commodities-boom state of Western Australia, where mortgage commitments fell by 5.8 per cent in November.

The ACT had the steepest monthly fall of 13.8 per cent.