Backed by ever increasing first homebuyer activity, mortgage broker Australian Finance Group (AFG) reported its best month ever with sales reaching $3.1bn in March.

After a poor December and January of decreasing mortgage activity, AFG said February sales rose 40% over 12 months before an even better March when sales jumped 18% for the month and 48% from the year earlier.

But the mortgage broker warned that the good times could quickly end in less than three months if the boost to the first home Owner Grants is withdrawn by the national government.

"The truth is, we're seeing a big reduction in the proportion of loans that are approved and eventually settle," said Mark Hewitt, general manager of sales and operations for AFG, noting that major lenders are tightening their lending. "Once the boost to the First Home Owner Grants end (on 30 June), we face the possibility of a bleak mortgage winter."

While some have hoped for an extension of the deadline, there has been no indication such an action would yet occur from the government.

The greatest first homebuyer activity was in NSW, where one third of all mortgages took place, according to AFG.

Hewitt also called on major lenders to offer "access to credit on reasonable terms."

"Robust housing demand is critical if we're to bring the construction industry back online, producing much needed new supply and protecting jobs," he said.

With the loans themselves, more borrowers may be starting to prefer fixed rates again.

After reaching an all-time low of 2.5% in February, AFG reported 3.7% of mortgages were fixed in March. The shift signals that people are beginning to see a bottom to the rate cuts approaching, said the AFG report.

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