Lenders have ramped up their credit controls by further lowering the amount they lend to borrowers.
 
According to AFG, the loan to value ratio (LVR), or the proportion of amount borrowed against the value of the property, has fallen to a record low during the month of June 2010.
 
LVRs reached a national low of 61.6% in June compared to 73% during the first half of 2009. AFG said LVRs have been in steady decline ever since.
 
Malcolm Watkins, Director of AFG said lenders are demanding higher deposits from potential home buyers while mortgage insurers, who provide cover to lenders for loans at higher risk of default, are increasingly insisting that buyers have deposits of around 20%.
 
The number of loans taken by first homebuyers continued to plunge, accounting for just 9.5% of all loans sold in June compared to 19.5% in the same month last year. In contrast, investors continue to strengthen, with 35.4% of all loans taken for property investments.

The number of people refinancing also rose to its highest level in a year, accounting for 39% of all loans sold by the mortgage broker.

 
“During the first six months, continued government stimulus measures, a rising stock market and a positive mining message saw real momentum build. What we’ve seen in the past six months, particularly the last quarter, is a reversal of fortune. Credit is still being restricted and confidence has taken a bashing,” he said.
 
Internal analysis at AFG showed mortgage activity shifting away from the resource states of Queensland, WA and South Australia during the past six months as fears of a super mining tax dented consumer confidence. Watkins noted that Victoria and New South Wales have performed above expectations as investors in particular have responded to increased housing demand from a growing population.