First home buyers are flocking to the suburbs

First home buyers are flocking to the suburbs

Aussies are snapping up their first homes in the outer suburbs, a big bank’s data reveals, eschewing the trend of living in city centres as modern lifestyles evolve.

The value of owner-occupier loans reached a record high in October, according to the Australia Bureau of Statistics (ABS) -- and driving 35 per cent of these commitments were first time home buyers.

Now data from NAB is offering insight into where first time buyers are choosing to make their homes.

The big bank experienced a 21 per cent lift in first time buyers over the year -- a timeframe that covers the disruption brought by the pandemic.

And the number of them picking up a property in a regional area surged by 44 per cent in the three months to October.

“First home buyers are back in the market at levels we haven’t seen for a decade,” Andy Kerr said, executive of home ownership at NAB.

“Demand has been supported by historically low interest rates and more government support, such as the First Home Loan Deposit Scheme and HomeBuilder.

“A brief pullback in property prices also helped (them) as the uncertainty of COVID-19 put many plans on ice.”

Where exactly are they buying?

About 57 per cent more first time buyers purchased a home in regional New South Wales, in areas including Ballina, Port Macquarie and the Central Coast. Another 17 per cent purchased a place in metro areas, such as western Sydney’s Abbotsbury, Campbelltown and Penrith.

Western Australia followed closely with 55 per cent more first time buyers purchasing a home in regional areas, trailed by Queensland at 44 per cent, SA and NT at 36 per cent, and Victoria and Tasmania at 30 per cent.

“Flexible working arrangements implemented due to COVID-19 are encouraging many Australians to consider a tree or sea change as easy access to the CBD moves down the priority list,” Mr Kerr said.

“Many are seeing the potential of more land and a more relaxed lifestyle with easy access to areas like the Blue Mountains in NSW and Great Ocean Road in Victoria proving very popular.”

The shift has seen regional home prices grow at more than twice the rate of city properties. Regional home values lifted by 5.7 per cent in the last 12 months, according to CoreLogic, compared to the 2.4 per cent increase of capital city home values.

What’s encouraging first home buyers to sign now?

All time cheap mortgages coupled with government support and handouts are giving people the confidence to buy their first homes.

The cash rate -- a marker used by banks to set interest on mortgages -- is at 0.10 per cent, a level not seen before. And the Reserve Bank of Australia has said it’s likely to stay that low for three years.

The government has also helped by making it easier for people to sign up to a home loan. The first home loan deposit scheme makes it possible for people to secure a mortgage with a 5 per cent deposit -- and they don’t have to worry about saving thousands more for lenders mortgage insurance, because the government guarantees the other 15 per cent shortfall.

There were two tranches of the first home loan deposit scheme made available this financial year, giving 20,000 people a hand in entering the property market. Those part of the second tranche would’ve had to purchase a new or newly built home in order to qualify.

But they could’ve also benefited from the government’s Homebuilder scheme. It offers eligible people a $25,000 grant if they spend from $150,000 to $750,000 to either renovate or build a new home.

These two subsidies -- coupled with record cheap mortgages -- likely helped the home loan market bounce back from the disruption of the pandemic, and then reach a new record of loan commitments signed in October.

A breakdown by postcode

NSW

Greater Sydney

2127 – including Newington +70%

2150 – including Parramatta +66%

2174 – including Abbotsbury +157%

2560 – including Campbelltown North +48%

2570 – including Camden & Oran Park +38%

2747 – including Llandilo & Cambridge Park +54%

Outside Sydney

2259 – including Wyong (Central Coast) +111%

2287 – including Wallsend (Newcastle) +65%

2444 – including Port Macquarie +143%

2478 – including Ballina +148%

VIC

West of Melbourne CBD

3217 – including Armstrong Creek +97%

3216 – including Waurn Ponds & Belmont +56%

3338 – including Melton South +38%

3029 – including Tarneit & Hoppers Crossing +22% (postcode with most lending to FHB in the state)

East of Melbourne CBD

3196 – including Chelsea and Edithvale +60%

3175 – including Dandenong +50%

3174 – including Noble Park +32%

3978 – including Clyde +32%

3810 – including Pakenham +27%

3977 – including Cranbourne +23%

Queensland

South-east

4118 – including Browns Plains (Logan City) +106%

4209 – including Coomera (Gold Coast) +94%

4300 – Greater Springfield (Ipswich) +67% (most lending)

4305 – Central Ipswich +93%

4306 – including Karrabin (Ipswich) +58%

4509 – including North Lakes (Brisbane) +99%

North and west

4817 – including Hervey Range and Bohle Plains (Townsville) +64%

4825 – including Mount Isa +115%

WA

Perth

6061 – including Nollamara & Mirrabooka +107%

6062 – including Morley +78%

6107 – including Cannington +63%

6110 – including Huntingdale +91%

6112 – including Armadale +63% (most lending)

Regional

6430 – Kalgoorlie +62%

6530 – Geraldton +117%

SA

5085 – including Clearview and Enfield +52%

5086 – including Oakden and Hillcrest +51% (most lending)

5108 – including Salisbury +68%

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How is interest charged on a reverse mortgage from IMB Bank?

An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.

No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

How to use the ME Bank reverse mortgage calculator?

You can access the equity in your home to help you fund your needs during your senior years. A ME Bank reverse mortgage allows you to tap into the equity you’ve built up in your home while you continue living in your house. You can also use the funds to pay for your move to a retirement home and repay the loan when you sell the property.

Generally, if you’re 60 years old, you can borrow up to 15 per cent of the property value. If you are older than 75 years, the amount you can access increases to up to 30 per cent. You can use a reverse mortgage calculator to know how much you can borrow.

To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

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.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
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  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

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When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.