First-home buyers are pouring back into the market

The nation's biggest brokers see a spike in young home seekers

First-home buyers are pouring back into the market

Two of the nation’s largest mortgage brokers are seeing a spike in applications from young home seekers as record-low rates and government support programs flood the property market with first-home buyers.

Wholesale broker AFG reported a 30% year-over-year spike in its total home-loan applications in the most recent quarter, while broker Mortgage Choice said it had also seen significant growth over the summer, according to a report by The Sydney Morning Herald.

AFG’s latest figures showed that 22% of loan applications lodged by its brokers in the last quarter were for first-home buyers, chief executive David Bailey told the Herald. That’s a significant increase over the historical average of 12% to 13% of loans going to first-home buyers. Bailey said that government programs for first-time buyers and rising prices were driving demand.

“As we are starting to see clearance rates improve and prices rise across the country, people are starting to worry that they might miss out,” Bailey said. “They are probably bringing their decisions forward … to take advantage of the incentives.”

Investors made up just 21% of AFG’s loan applications – the lowest percentage on record.

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The economic shocks of the COVID-19 pandemic did not hit the property market as severely as many feared, and home prices rose in late 2020 after the RBA slashed the cash rate and banks instituted repayment holidays for struggling borrowers.

Mortgage Choice chief executive Susan Mitchell told the Herald that the market had been “very buoyant” over the last two months, with loan applications up 25% to 30% year over year. Mitchell also said that first-home buyers accounted for nearly 25% of applications, up from 13% to 15% historically.

“We are seeing the first-home buyers back at the same level that we saw back in 2009,” Mitchell said.

Mortgage broker reported that inquiries since December had spiked more than 60% from the same period the prior year, and said there was strong interest from both first-home buyers and returning expats.

Even in the midst of a lending spike, however, market watchers are projecting a modest increase in foreclosures as banks stop offering automatic repayment holidays for customers impacted by the COVID-19 pandemic. However, Louis Christopher, managing director of SQM Research, told the Herald that he wasn’t concerned about a “mass forced-sale event.”

“The banks have done well in managing the loan deferrals,” Christopher said. “They have shrunk from their peaks at the beginning of the pandemic.”