Rate cuts fail to excite first home buyers

Staff Reporter

A series of rate cuts has failed to ignite the buying spirit of potential first home owners.

According to recent research by RP Data, there were 97,672 housing finance commitments by first home buyers over 2012.

“Considering that the numbers of commitments were up by 4.9 per cent compared to 2011 volumes, and standard variable mortgage rates were 85 basis points lower in December 2012 than they were in December 2011, this is a fairly disappointing result,” RP Data’s research analyst Cameron Kusher said.

On a month-to month basis throughout 2012, first home buyer finance commitments were strongest in October, May and August.

In October, standard variable mortgage rates were reduced by an average of 20 basis points and in May they fell by an average of 35 basis points.

“Clearly the falls in variable mortgage rates over these months resulted in an increase in activity by first home buyers. On the other hand, first home buyer activity tapered off significantly over the final two months of the year, despite a further cut to mortgage rates in November,” Mr Kusher said.

“Changes to stamp duty rates and first home buyer concessions, particularly if they buy or build a new property, have also had an impact on the results over the year.”

First home buyer commitments accounted for only a marginal proportion of total housing finance commitments throughout 2012.

Over the year, there were a total of 546,765 housing finance commitments to owner occupiers, 97,672 of which were to first home buyers, equating to 17.9 per cent of all owner occupier commitments.

The figure had also increased over the year, albeit by just 0.1 percentage point from 17.8 per cent in 2011.

Mr Kusher said the limited activity in first home buyer housing finance commitments was disappointing given the overall housing market conditions throughout 2012, during which capital city home values fell by 0.4 per cent through the year while towards the end of the year values were 5.7 per cent lower than at their October 2010 peak.

Standard variable mortgage rates were also much more accommodating throughout the year, falling from 7.3 per cent in January 2012 to 6.45 per cent in December 2012.

Between 2000 and 2012, there has been an average of 117,686 housing finance commitments to first home buyers each year.

“Based on these figures, housing finance activity among first time buyers was 17.0 per cent below the average,” Mr Kusher said.

“That said, given a rise in home values over the second half of 2012, and the prospect of further mortgage rate cuts in 2013, conditions bode well for a further increase in first home buyer activity. As to what extent first home buyer activity increases remains to be seen, however, [although] we anticipate that any further increases are likely to be fairly moderate.”

Staff Reporter

A series of rate cuts has failed to ignite the buying spirit of potential first home owners.

According to recent research by RP Data, there were 97,672 housing finance commitments by first home buyers over 2012.

“Considering that the numbers of commitments were up by 4.9 per cent compared to 2011 volumes, and standard variable mortgage rates were 85 basis points lower in December 2012 than they were in December 2011, this is a fairly disappointing result,” RP Data’s research analyst Cameron Kusher said.

On a month-to month basis throughout 2012, first home buyer finance commitments were strongest in October, May and August.

In October, standard variable mortgage rates were reduced by an average of 20 basis points and in May they fell by an average of 35 basis points.

“Clearly the falls in variable mortgage rates over these months resulted in an increase in activity by first home buyers. On the other hand, first home buyer activity tapered off significantly over the final two months of the year, despite a further cut to mortgage rates in November,” Mr Kusher said.

“Changes to stamp duty rates and first home buyer concessions, particularly if they buy or build a new property, have also had an impact on the results over the year.”

First home buyer commitments accounted for only a marginal proportion of total housing finance commitments throughout 2012.

Over the year, there were a total of 546,765 housing finance commitments to owner occupiers, 97,672 of which were to first home buyers, equating to 17.9 per cent of all owner occupier commitments.

The figure had also increased over the year, albeit by just 0.1 percentage point from 17.8 per cent in 2011.

Mr Kusher said the limited activity in first home buyer housing finance commitments was disappointing given the overall housing market conditions throughout 2012, during which capital city home values fell by 0.4 per cent through the year while towards the end of the year values were 5.7 per cent lower than at their October 2010 peak.

Standard variable mortgage rates were also much more accommodating throughout the year, falling from 7.3 per cent in January 2012 to 6.45 per cent in December 2012.

Between 2000 and 2012, there has been an average of 117,686 housing finance commitments to first home buyers each year.

“Based on these figures, housing finance activity among first time buyers was 17.0 per cent below the average,” Mr Kusher said.

“That said, given a rise in home values over the second half of 2012, and the prospect of further mortgage rate cuts in 2013, conditions bode well for a further increase in first home buyer activity. As to what extent first home buyer activity increases remains to be seen, however, [although] we anticipate that any further increases are likely to be fairly moderate.”

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