Investor confidence grows but first-homebuyer activity drops

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Investor activity continues to improve amid signs that the property market has already turned the corner, a new data has showed.

The proportion of loans taken by investors rose to 29% in June according to Australian Finance Group (AFG). This is the third consecutive month of solid increases and is trending closer towards AFG's long term norm in the range of 30-35% of all mortgages sold.

In contrast, mortgage sales to first homebuyers dropped by whopping 30% since their peak in March this year. AFG Mortgage Index shows that 19.5% of all mortgages sold in June were to first homebuyers – this compares to 28.1% three months earlier. However, AFG said the trend has been sharply magnified as the first homebuyer sector returns to levels closer to the long term norm of between 10% and 15%. AFG is the first to report a notable decrease in first homebuyer activity since the first homeowner grant boost was announced last year.

"We're seeing a number of encouraging signs that the mortgage market is normalising. First homebuyers, investor activity and LVR's are all reverting towards long term trend after a period of turmoil," said Mark Hewitt, general manager of sales & operations at AFG.

Demand for fixed rate loans also increased from a low of 2.5% in February to 8.3% in June as borrowers moved in to lock their rates. However, majority of borrowers still prefer the flexibility of a variable rate loan with 49.5% of borrowers opting for feature-laden standard variable mortgages.

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