THE average first-home loan in NSW has risen more than $50,000 in just over a year, climbing to $300,000 on the back of low interest rates and generous government grants. The success of the boosted first-home owner grant in stimulating the market has drawn applause from the Government, but experts warned of the potential danger of a housing bubble as young couples take on loans they will struggle to maintain. First-home buyers are taking out a record 28 per cent of the value of all home loans, Bureau of Statistics figures released yesterday showed. But the surge in borrowing runs the risk of overinflating the lower end of the housing market. "We have just got to make sure that we don't get a recovery on the back of over-extended young couples," said Julian Disney, an affordable housing expert from the University of NSW. The Reserve Bank Governor, Glenn Stevens, cited similar concerns last week, saying it would be counterproductive if low interest rates encouraged marginal borrowers to take on large debts. Yesterday's release came alongside a rise in consumer confidence, attributed to the resilience of the economy amid global recession. When the Government doubled the first-home owner grant in October as part of its response to the financial crisis, the average loan to new buyers was lower than that taken out by non-first-home buyers. Since then, the average loan for first-home buyers across the country has increased $50,000 to $283,000 - about $25,000 more than loans to buyers who already have a foothold in the market. For NSW home buyers, the average first mortgage is $299,000, against $276,000 for existing home owners. Before October, there had been little increase in the average first mortgage for about four years. Asked if the the market had been inflated by grants, the Treasurer, Wayne Swan, said yesterday's figures showed the benefits of the Government's economic stimulus packages. "It has played a very important role in supporting employment in the Australian housing and construction industry." Professor Disney, the director of the social justice project at the University of NSW, supported the supersized grant as an economic emergency measure. But he said the Government should consider winding back the original $7000 grant to prevent a new housing bubble. "Every month the risk of inveigling people into a dangerous situation increases," he said. Loans to owner-occupiers increased for the seventh consecutive month in April, after falling in each of the eight months before the grant was doubled. Overall, the value of housing finance rose 0.9 per cent in April. Banks have already responded to a crush of demand from first-home buyers by making it more difficult to get a loan. The big banks are only writing loans up to 90 per cent of the value of the property, and insisting on at least 5 per cent genuine savings for a deposit. Borrowers are complaining of waiting up to a month to get a loan approved from the big banks. But Mark Haron, the principal at the mortgage broker aggregation group Connective, said the market had quietened in the past couple of weeks. There remained plenty of enthusiasm among first-home buyers, Mr Haron said, but they were having to spend longer looking for houses because prices kept going up. In October, the $14,000 grant for existing homes will fall to $10,500, before dropping to $7000 in January. The $21,000 grant for new properties will drop to $14,000 in October, and $7000 next year. Bill Evans, the chief economist at Westpac, which published the consumer confidence index, called this month's increase a "truly remarkable result". "It is the second largest recorded increase in the index since the survey began in 1974," said Mr Evans, adding it was likely due to the small increase in economic growth figures released last week. Unemployment figures released today are expected to show an increase in the jobless rate. Source From SMH