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What the rise of first home buyers means for you

What the rise of first home buyers means for you

The number of first home buyers has finally began to increase thanks to state and territory incentives such as grants and tax concessions, according to data from CoreLogic.

The Australian Bureau of Statistics (ABS) Housing Finance figures for February 2018 showed that while owner-occupied loans were on the rise compared to investor loans, the overall number of housing finance commitments were falling, including first home buyers.

However, CoreLogic data highlighted that although the volume of loans was down on levels in late 2017, it was “33.1 per cent higher than the previous February” specifically for first home buyers.

Nationwide, first home buyers also accounted for 17.9 per cent of all owner-occupier commitments, an increase of 4.6 percentage points from the previous year (13.3 per cent).

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Source: CoreLogic.com.au

NSW first home buyers

  • The number of first home buyers has reached 15.1 per cent of owner-occupier finance commitments in February 2018, rising 7.6 percentage points from February last year.
  • This is the greatest share of owner-occupied loans since October 2012.
  • This increase has been linked to stamp duty concessions becoming available for first home buyers from 1 July 2017.
  • Since these changes were implemented, there have been 18,400 commitments in the 8 month period compared to 10,857 over the previous 8 months.

First home buyer housing finance commitments in NSW:

February 2017

February 2018

Change (%)

1,105

2,246

+103.3

VIC first home buyers

  • The number of first home buyers in VIC account for 18.3 per cent of owner-occupier finance commitments in February 2018, compared to 13.9 per cent from the last year.
  • This increase has also been linked to stamp duty exemptions becoming available for first home buyers from 1 July 2017.
  • Since these changes were implemented, there have been 23,996 first home buyer commitments in the 8 month period compared to 17,522 over the previous 8 months.

QLD first home buyers

  • The number of first home buyers in QLD account for 19.3 per cent of owner-occupier finance commitments in February 2018, compared to 17.6 per cent a year earlier.
  • Throughout February 2018, there were 1,839 first home buyer housing finance commitments, only 3.8 per cent higher from a year ago.

SA first home buyers

  • CoreLogic data highlighted that despite housing values in Adelaide being the lowest of any mainland capital city, “SA has the lowest share of first home buyer activity of any state or territory with 13 per cent of owner-occupier commitments going to first home buyers”
  • This was an increase of 2.5 percentage points from February 2018 (10.5 per cent).
  • Throughout February 2018, there were 443 first home buyer housing finance commitments, 17.8 per cent higher from February 2017.

WA first home buyers

  • The number of first home buyers in WA account for 25 per cent of owner-occupier finance commitments in February 2018, compared to 22.2 per cent a year earlier.
  • Throughout February 2018, there were 1,185 first home buyer housing finance commitments, falling 0.1 per cent from the year before.

istock_79305201_small5

TAS first home buyers

  • The number of first home buyers in TAS account for 13.9 per cent of owner-occupier finance commitments in February 2018, compared to 13.8 per cent a year earlier.
  • Throughout February 2018, there were 137 first home buyer housing finance commitments, 2.2 per cent higher from a year ago.

It is believed that younger people are moving to Tasmania to purchase a home due to the lower housing prices compared to the mainland. For example, based on Domain State of the Market Report, the median house price for Hobart is $409,592, more than half of the median house price for Sydney ($1,167,516).

CoreLogic Head Researcher, Cameron Kusher, noted that “although the number of first home buyers rose over the year, they remain very low which suggests, at least at this stage, first home buyers in Tasmania are not particularly active”.

NT first home buyers

  • The number of first home buyers in NT account for 19.4 per cent of owner-occupier finance commitments in February 2018, compared to 14.7 per cent a year earlier.
  • Throughout February 2018, there were 52 first home buyer housing finance commitments, an increase of 26.8 per cent from the previous year.

ACT first home buyers

  • The number of first home buyers in ACT account for 25.6 per cent of owner-occupier finance commitments in February 2018, the highest share since October 2009.
  • Throughout February 2018, there were 261 first home buyer housing finance commitments, an increase of 177.7 per cent from the previous year.

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What does this mean for aspiring first home buyers?

CoreLogic Head Researcher, Cameron Kusher, noted that this data highlights the “sensitivities of this important market segment to both affordability constraints as well as market incentives such as first home buyer grants and stamp duty concessions”.

“Despite broadly slowing conditions in Sydney and Melbourne, it’s clear from CoreLogic indices that the more affordable end of the housing markets in these cities are still seeing values rise, at least in annual terms – a likely demonstration of stronger demand from first home buyers. 

“In other cities where affordability constraints are less severe, in the absence of any changes to first home buyer incentives, first time buyers generally remain more active relative to Sydney and Melbourne.

“With demand from the investment segment expected to continue to be weaker than it has over recent years this may afford more opportunities for first home buyers to enter the market,” said Mr Kusher.

It is also important to keep in mind that for those first home buyers looking in Sydney and Melbourne, purchasing property in this post-housing market peak could see you entering into a “negative equity position”.

First home buyers looking outside of Sydney and Melbourne should also consider that those who weren’t able to afford in the two capital cities could soon saturate these more affordable areas.

This in turn will increase competition and affordability as, according to Mr Kusher, “the outflow of people from NSW to other states and territories is continuing to rise which may result in increases in first home buyers elsewhere”.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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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.

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.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

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.

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.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

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.

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

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. 

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 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 to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

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.