Financial Schools Reviews

The results of a new survey suggest that residential mortgage applications dramatically declined during the March quarter, after the Federal Government rescinded its enhanced first home owners grant, and reset it at the pre financial crisis level.

According to consumer credit check company Veda Advantage, total mortgage applications plunged by as much as 15 per cent during the March quarter, compared with the same period in the previous year.

The fall represented the first quarterly decline in consumer mortgage demand since the December 2008 quarter. Total mortgage applications to March 31 dropped by eight per cent on the December 2009 quarter, Veda said in a statement on Wednesday.

In October 2008, the federal government in response to the global financial crisis enhanced the level of subsidy for first home owners. The government increased the grant from $7,000 to as high as $21,000 for those constructing new homes, and $14,000 for those purchasing existing dwellings.

The government has slowly begun rolling back the level of its subsidy, as the global financial crisis began to stabilise. The government first rolled back the grant to $14,000 in October 2009 for new constructions, and $10,500 for existing dwellings.

In January this year, the grant has been rolled back to its initial level of $7,000 for type of homes.

Veda head of external relations Chris Cration said the data proved how effective the federal government’s stimulus measures had been in pulling forward mortgage demand.

“One consequence of a withdrawal in government incentives is a relatively sharp drop off in housing credit demand in 2010,” he said.

According to data from mortgage broker Australian Finance Group, first home buyers have continued to disappear from the market, and now constitute just 10 per cent of the market this month, compared to as much 28 per cent of the market in March 2009.

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