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Tougher outlook for first home buyers

Tougher outlook for first home buyers

October 27, 2010

First home buyers are finding it tougher to enter the property market than last year, with some first home buyers pushed out altogether due to higher costs. But by taking the right turns and keeping to the map, the road ahead doesn’t need to be as rough.

According to RateCity’s inaugural First Home Buyer Report there has been a reduction in the number of first home buyers. Significant increases to the level of difficulty for purchasing a home and paying off a mortgage have had a major impact on their decision to buy a home. RateCity recorded around 15 percent of mortgages going to first home buyers in August, compared to an average of 26 percent last year.

Reasons behind the tougher outlook
One major contributing factor for first home buyers was a rise in interest rates, with the RateCity First Home Buyer Index found it is 18 points tougher for first home buyers in August this year compared to August 2009.

“We’ve seen a 1.6 percentage point rise to the benchmark basic variable rate – which is the average of the major four banks including ANZ, Commonwealth Bank, National Australia Bank and Westpac – to 6.78 percent,” RateCity CEO Damian Smith says.

It’s also more expensive to buy, with increasing house prices resulting in the national average first home buyer loan size increased by 4.58 percent to $283,200 in August compared to August 2009. These factors caused a rise to the national average first home buyer mortgage repayments of 21.86 percent to $1962 per month, according to the report.

In addition, the First Home Owner’s Boost ended in December 2009, and $50 million less is being paid per month to first home buyers through First Home Owner Grant than there was in August 2009.

Signs of life returning to the mortgage market
Despite the gloomy outlook for first home buyers, many are starting to return to the market.

“Applications for introductory rate home loans on RateCity (typically the most popular product for first home buyers) have nearly tripled since May, and as these applications take a few months to turn into settled loans, there’s a good chance we’ll see uplift in coming months,” Smith says.

While interest rates remain stable and we see an improvement in the economy, first home buyers could use this opportunity to enter the market for their first home.

And there are ways to beat rising rates and save, by shopping around for a good value home loan that will suit your needs. Compare home loans online as the right home loan could mean a big difference to your repayments. For instance, the current benchmark basic variable rate is 6.78 percent, however one of the best variable comparison rates on RateCity is at 6.46 percent. For a $300,000 mortgage size, you could potentially save $19,200 over a 25-year term loan.

“The finer details about home loans can mean a big difference to the cost so make sure you spend some time reading the product disclosure statement to make sure you understand the contract and it is right for you,” Smith said.

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Learn more about home loans

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.