Twice as many Aussies want to buy their first home

Twice as many Aussies want to buy their first home

Deflated prices, cheap mortgages and government subsidies are motivating twice as many people to buy their first property, according to a big bank’s research.

The number of people wanting to buy their first home in the next five years has more than doubled from 7 to 16 per cent in the space of 12 months, according to a survey of 2088 people commissioned by Westpac.

People want a place of their own after spending lockdowns with family, friends and housemates, Anthony Hughes said, managing director of mortgages at Westpac.

“It’s … interesting to see this is now largely being driven by Gen Z, who after being cooped up at home during restrictions are now ready to leave their housemates or parents behind for a place of their own – many of whom might not have considered this a possibility prior to COVID-19,” he said.

“Even though younger generations have been some of the most financially impacted this year, it’s positive that many have really used this time to take stock of their finances and get serious about their long-term goals.”

The survey found 69 per cent of participants currently live with housemates, parents or in-laws. Nearly a third -- 32 per cent -- believed home ownership would grant them a sense of independence.

First time buyers accounted for more than a third of November’s $17.3 billion owner-occupier loans, according to the Australian Bureau of Statistics (ABS), many of them likely taking advantage of the government’s First Home Loan Deposit Scheme.

The debt, prices and timing are right

A variety of reasons are encouraging property floaters to buy a home of their own. About 54 per cent said they don’t want to pay rent anymore, while 39 per cent seek greater financial stability.

Nearly one-in-two were optimistic about buying a property -- even though it would be against the backdrop of a pandemic. About 38 per cent of them credited falling house prices and 24 per cent cited low interest rates.

The COVID-19 pandemic highlighted another changing trend, according to the survey results. People were reconsidering where they would like to live.

About 48 per cent said the pandemic had made them reconsider the type of suburb or area they would like to live in, but the statistic increased to 59 per cent for younger age groups.

“While we’re seeing an increasing interest in properties that offer more space, there’s still a strong desire from first home buyers to live somewhere that’s still only about 20-30 minutes away from the CBD,” Mr Hughes said.

WHERE FIRST HOME BUYERS WANT TO LIVE IN 2020. Source: Westpac

Planning to buy in Sydney Planning to buy in Melbourne Planning to buy in Brisbane Planning to buy in Adelaide Planning to buy in Perth
Up to 10km from the city centre About 20-40km from the city centre About 10-20km from the city centre About 10-20km from the city centre Up to 10km from the city centre
1. Western suburbs 1. Eastern suburbs 1. Brisbane CBD & inner-city suburbs 1. Southern suburbs 1. Northern suburbs
2. Sydney CBD & inner-city suburbs 2. Northern suburbs 2. Northern suburbs 2. Northern suburbs 2. Perth CBD & inner-city suburbs
3. Northern suburbs 3. Melbourne CBD & inner-city suburbs 3. Southern suburbs 3. Western suburbs 3. Eastern suburbs

The shift away from cities could present challenges for first time buyers

The survey’s findings come as 10,500 people left city centres to live in regional areas in the June quarter, according to the ABS.

“In the year to October, combined regional Australian dwelling markets rose 4.8 per cent, compared with a 3.9 per cent lift in the capital cities,” Eliza Owen said, head of research at CoreLogic.

The shift in demand has not been met with enough supply, as fewer properties are listed on the market, leading to prices going up, and potentially locking out locals looking to buy their first property.

“For local first home buyers, declining affordability may become a problem,” Ms Owens said.

“Growth may start to slow in regions that have already seen a sustained upswing, due to such affordability constraints.

“These include areas such as Illawarra, Newcastle and Lake Macquarie, the Gold Coast and the Sunshine Coast, where annual growth rates in houses have already exceeded 7 per cent in the year to October.”

Generally though it’s getting easier to buy

There’s more examples of paying a mortgage being cheaper than rent, according to a report from Aussie Home Loans.

The brokerage firm’s Buy v Rent report compared two mortgage scenarios to median rent, including fixed and variable loans based on Reserve Bank of Australia (RBA) figures.

On variable rate loans with interest at 3.65 percent, it was cheaper to service a mortgage on 33 per cent of houses and 38 per cent of apartments than rent, the report found.

And on loans where interest is fixed at 2.35 per cent for three years, it was cheaper to service a mortgage on 52 per cent of houses and 60 per cent of apartments than to pay rent.

“In many suburbs across Australia, especially those outside the major capital cities, on a monthly basis, it is cheaper to buy than rent,” James Symond said, chief executive of Aussie Home Loans.

Many banks are offering interest rates lower than the RBA figures used in the report’s calculations, creating the opportunity for less expensive repayments.

According to the RateCity database, 31 lenders are offering at least one mortgage rate under 2 per cent, following last week’s historic cash rate cut.

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Learn more about home loans

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

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.

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 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.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

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.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.