Bargain-conscious property investors got back into the action in March, lured by the attractive prices on offer in the market, a new report has shown.
According to mortgage broker Australian Financial Group (AFG), the proportion of mortgages taken for investment purposes rose by 2.4% to about a third (31.4%) of all mortgages sold by the group, compared to the previous month. The increase defied the negative sentiment surrounding the 0.25% rate increase in March.
Refinancing also continued to surge to record levels; 39.3% of all mortgages arranged were for refinancing rather than buying a new property.
Fears of further rate increases by the Reserve Bank of Australia (RBA) and independently by the banks spurred a sharp rise in the number of people taking fixed rate loans. About a quarter (24%) of borrowers chose fixed rates, while 38.5% chose standard variable loans.
Rate jitters also prompted many potential buyers to stay in the sidelines during the first three months of the year. AFG reported that the volume of mortgage sales dropped by 14.2% in the first quarter of 2008 compared to a year ago. The state most affected was NSW, where quarterly sales sank by 18.9%. Queensland sales dived by 16.4% and Western Australia fell by 14.2%.
"This sales contraction is unprecedented in our experience," says Mark Hewitt, general manager at AFG. "There's no doubt that the high interest rate regime has already done its work supporting the RBA decision not to increase rates further."
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