Low interest rates fail to attract first home buyers

19th of July 2013 | by Michelle Hutchison

First home buyers are still cautious of entering the home loan market despite lower interest rates, with the proportion of first home buyer loans financed at a nine-year low according to the latest Australian Bureau of Statistics (ABS) data analysed by Australia's leading financial comparison website RateCity.com.au (RateCity).

According to RateCity, the national proportion of first home buyer home loans out of all loans financed was less than 15 percent in May, which was 24 percent lower than October 2011 (19 percent) before the cash rate began to fall.

The proportion of first home buyer loans has been below 15 percent for the past six months to May 2013, which is the lowest level since June 2004.

Even though the number of first home buyer loans financed in May was the highest level for the past seven months, with 8,147, it was still lower than May 2012, which saw 964 more first home buyer loans financed. There were also 318 more first home buyer loans financed in October 2011 than May 2013, before the cash rate began to fall.

Some states were hit harder than others, while five out of eight states saw a rise in first home buyer proportions in May.

NSW was the hardest hit as RateCity recorded 60 percent (1,769) fewer first home buyers in May compared to October 2011. And the proportion of NSW first home buyers was two-thirds (-66 percent) less – from 22 percent in October 2011 to 7 percent in May. This was the lowest proportion than any other state.

Western Australia saw the biggest proportion of first home buyers entering the market, with 24 percent of all loans financed were first-timer buyers. While Tasmania saw the biggest jump in the proportion of first home buyers since October 2011, with 30 percent growth.


Number of first home buyer loans financed in May 2013

Proportion of first home buyer loans in May 2013

Difference in proportion since October 2011 (percentage points)





































Source: RateCity analysis of ABS original figures


Michelle Hutchison, Spokesperson for RateCity, said the figures show that first home buyers need more incentive than lower interest rates.

“First home buyers have hit a wall when it comes to entering the home loan market. This is surprising since interest rates are among the lowest levels we’ve ever seen, which means we’re at one of the most affordable times to maintain a home loan.

“Despite this, first home buyers are still cautious about entering the market, which shows that more incentive is needed to attract first home buyers such as government grants or better home loan deals.

“But first home buyers can take advantage of the low interest rate environment if they have saved a deposit and are ready to enter the market. While there are other costs associated with starting a home loan, most home loans only need a deposit of 5 percent, which is $15,000 for a $300,000 property. The cost of a home loan can vary significantly between lenders so compare home loans online to ensure you get a good value deal.”

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