By Robert Carry

The reigning in of first homebuyer incentives and rising interest rates will bring about a significant reduction in the number of people seeking mortgages, Australian Finance Group's (AFC) general manager of sales and operations has said.

A recent report from the group found that the mortgage market cooled in October as the number of first homebuyers fell by 27% from the previous month.

Mark Hewitt, general manager of sales and operations said most people were
expecting a fall in first homebuyer activity. He added, "The fact that the rate rise cycle kicked in at the same time delivers something of a double-whammy. With the second rate rise announced last week we're expecting that there will be continued caution on the part of buyers."

According to the AFG Mortgage Index, the total volume of home loans advanced to
first homebuyers fell from $489m in September to $357m in October.

This contributed to an overall month-on-month contraction in the mortgage market of 11.5%, with the total volume of mortgages arranged by AFG falling from $2.9bn in September to $2.6bn in October.

Hewitt continued, "At their peak in March, when they were rushing to beat what they believed could be an end of financial year deadline, first homebuyers comprised 28% of the total mortgages arranged by AFG - a volume of $732m. By October that figure had halved to $357m.