The number of first homebuyer lending declined dramatically with first homebuyer loans dropping by 34% over the past 12 months to January 2010. This massive fall is substantially higher than the 26% annual decline in July 2002 when the original first homebuyer boost expired.
Despite falling numbers, first homebuyers' buying intention remained strong according to the QBE LMI's Mortgage Update. The report found that a quarter of all surveyed still expected to buy within the year. Rising interest rates and soaring property prices have also forced many aspiring homeowners to look at detached dwellings, with 38% of respondents planning to buy townhouses or apartments.
"The research confirms that first homebuyers are adjusting their expectations by turning to established or smaller dwellings such as townhouses and apartments," said Ian Graham, CEO of QBE LMI. "This reflects pressure on affordability following the expiration of the first homeowner grant boost and higher interest rates on mortgages."
Graham added that the forecasted rent rises should help drive first homebuyer demand in 2010. "The move from renting to paying off a mortgage will continue to be an attractive option and as a result will encourage many first homebuyers to enter the market in the year ahead."