First home buyers better off, but still absent

article header

A late-2011 surge in first home buyers has failed to resurrect a weak lending market, according to a new research report, which revealed first-time buyer numbers at eight-year lows.

Despite some improvement in conditions, just 7800 first-time buyers entered the property market on average per month last year, falling short of the past decade’s monthly average of almost 10,000, the RateCity First Home Buyer Index shows.

Damian Smith, RateCity chief executive, said a slow home loan market means lenders are hungry for more business and many are still willing to negotiate on rates and fees: “It’s good news for first home buyers who are ready and prepared to enter the property market.”

$80 better off each month

Improved conditions are largely due to consecutive interest rate cuts in November and December, house prices remaining flat or declining and a sluggish home loans market, which means first home buyers are in a good position to get a foot on the property ladder this year, Smith said.

“Despite rising funding costs, the biggest single issue for lenders is a slow market; they desperately need to kick-start lending. That’s good news for first home buyers, but only those with solid deposits, a good track record of savings, and the knowledge and tools to shop around,” he said.

“While these indicators are encouraging and our outlook for most first home buyers entering the market in 2012 is positive, some perspective is important. First home buyer numbers are at their lowest levels in eight years.”

The average first home buyer loan size fell 1.63 percent in the six months to December 2011 to $283,100. At the benchmark basic variable rate of 6.89 percent, borrowers earning the national average income will be allocating one quarter of earnings, $1981 per month, to service the loan (as at December 2011); that’s $80 better off per month than in December 2010.

State by state

  • First home buyers in most states including New South Wales, Queensland, South Australia, Victoria and Western Australia are in a better position to enter the market compared to 12 months ago.
  • Queensland has come out on top after a year of hardship for many homeowners, with lower house prices and rates making it more affordable for first home buyers to enter the market this year.
  • Northern Territory was the only state to show a negative result in RateCity’s First Home Buyer Index as borrowers took on larger mortgages, while Tasmania was the only state to see no change to the Index.
  • First home buyers in South Australia, Tasmania and Northern Territory are taking on more debt than six months ago.

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

Compare your product with the big 4 banks, or add more products to compare
As seen on