HOME LOANS

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Home ownership out of reach for families

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For many families their own home is their major financial asset; because capital gains on sale of owner-occupied housing in Australia are exempt from taxation, increases in the value of homes has therefore been a vital part of how wealth gets created in Australia for average families.

In fact, the Australia Bureau of Statistics notes that:

"Home ownership is a widely held aspiration in Australia, providing security of tenure and long-term economic benefits to home owners. Owning a home can also bring social and cultural benefits such as a sense of belonging. For some home owners, the dwelling and the land on which it stands is a major asset, and for many it is their main asset."

Overall, home ownership statistics in Australia haven’t actually moved much over several decades. In 1971, the ABS measured home ownership (which includes people who own their home outright and those paying off a mortgage) at 69 percent. In both the 2006 and 2011 census, the figure was at or around 70 percent.

But for some groups, home ownership statistics have changed markedly in just the last five years. One group with historically high home ownership is families with children under the age of 15 years of age. In 2006, nearly 80 percent of these families either owned their home outright or were paying off a mortgage.

Michelle Hutchison, spokeswoman for RateCity, said that figure has dropped nearly three percentage points in just five years.

"Higher property prices to get into the market in the first place, and high repayments caused by larger loans and rising interest rates, have made it difficult for many of these families," she said.

"The good news is that many of the families who appear to have dropped out of the housing market are in fact saving aggressively to build a larger deposit for their first home."

While they’re still complicated, first home saver accounts are actually a great deal for many such families. They provide for tax benefits on interest income, plus an interest rate boost on top of normal savings account rates.

And falling interest rates, combined with a slow housing market, means that Australia’s lenders are actually desperate to lend to good-quality borrowers. Families with more than one income, and with a deposit of more than 10 percent – hopefully as much as 20 percent – have a good chance of being able to negotiate an even better interest rate than those that are advertised. The best way to put yourself in the frame to negotiate a better deal is to start by comparing home loans; only by knowing the market, and talking to at least three lenders, will you be able to use some negotiating power to get the best possible rate and the right home loan.

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