February 28, 2011
January Demand for newly built property has been leading the growth of home loans at the end of 2010, echoing the initial damage of the Brisbane floods. But with interest rates expected to climb this year, there are high hopes first home buyers will boost the market back into more lively days.
The Australian Bureau of Statistics (ABS) recorded a 9.7 percent increase in new dwelling purchases between October and November 2010. While a hefty jump, it’s only the tip of the home loans iceberg, making up about 5 percent of the market. Total home loans also made a healthy jump of 2.5 percent.
A new hope
Speculation also surrounds the increase in the percentage of first home buyers taking out home loans in November 2010, up from 15.4 per cent to 15.6 per cent in the month.
Recent widening of the first home buyers ratio has sparked talks about a return from their quiet withdrawal after the cuts to the First Home Owner Grant and First Home Owner Boost at the end of 2009. Since then, the home loans market has been dragging a sluggish recovery, with the number of home loans taken out in November being almost 30 percent lower than the peaks reached in mid-2009.
The first home buyer comeback tour
So what will it take for first home buyers to resettle into the market, despite variable interest rates being over 200 basis points higher than 2009?
Firstly, average interest rates should not be the standard for your home loan search. By simply comparing home loans online, you can find some of the cheapest products of the lot, such as the 6.96 percent No Fee Offset offered by Homestar (as at February 28, 2011).
Compared to the benchmark basic variable rate (average of the major four banks) of 7.18 percent, that’s a saving of $57 a month on a $250,000 loan over 25 years, and a total difference of over $17,000 in total repayments.
And there are still plenty of incentives for first home buyers, including the $7000 First Home Owners Grant and the First Home Saver Account scheme, where buyers can get up to $850 worth of government contributions a year towards a new home.
There’s a reason that first home buyers were the breath of fresh air in the 2009 boom. Anyone who wants the best for their first purchase will hunt every corner of the market for bargains. If everyone had this attitude, we wouldn’t be looking towards first home buyers for growth – we’d all be in the race ourselves.