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First Home Buyers

Posted by Tamara McDowell on April 19, 2010

FIRST home buyers are rapidly being priced out of the property market as cashed up investors snap up properties amid a housing shortage.

Martin North, managing consulting director of Fujitsu Consulting, says a buoyant economy and strong jobs prospects have spurred established home owners to invest in property or upgrade their homes as house prices continue to rise.

Mr North said affordability for first home buyers was likely to keep falling while investor appetite picked up.

“We have such a demand from property investors and people trading up who are now feeling more wealthy and affluent, because the GFC has passed and their jobs (are) safe, that we’ve got quite a lot of buoyancy in the marketplace,” he said.

Average loans now were 40 per cent larger than in 2005, although the number of loans had not increased greatly, Mr North said.

First home buyers, on average, now put 40 to 45 per cent of their income aside for mortgage repayments while established owners were paying between 25 and 30 per cent, he said.

Three interest rate rises and an end to the Federal Government’s more generous first home buyer grant at the end of 2009 were blamed for the steady drop-off in mortgage demand.

Some analysts say the current cash rate of 4.25 per cent might have already started to bite.

“It might be happening already,” said Mortgage and Finance Association of Australia chief executive Phil Naylor.

“Because home financing has dropped over the last few months, initially the reaction was that this is because of first home buyers and that is probably true,” Mr Naylor said.

“The slowdown is continuing, so you’re probably entitled to say now that the slowdown is more to do with the fact that interest rates are on the increase.”

There were signs that investors were coming back to the market, he said.

“They have partially taken over some of the fall away that’s occurred in the first home buyer area,” Mr Naylor said.

As interest rates rose, the percentage of first home buyer loans would “dwindle a bit further,” Mr Naylor said.

Meanwhile the Real Estate Institute of Australia (REIA) has called for an increase in the first home owner’s grant and expressed concerns that major banks could increase the deposit requirements for first home buyers from 10 per cent to up to 20 per cent.

“I am deeply concerned about the impact this will have on first home buyers as they struggle to bridge the deposit gap,” REIA president David Airey said.

First home buyers have many things to consider when they are looking for their first property – one of the most important aspects of your property search is your finance.

Particularly at this point in time, when home loans are moving back towards the need for a fairly decent deposit, first home buyers need to plan their finances well before heading out to look for a property.

This includes saving for a deposit – usually between 10 and 20 per cent of the purchase price is now required, or other finance options like using family equity.

Low deposit loans are in great demand but short supply, so as a first home buyer you need to explore the options available to you. Available still only from a small number of lenders, these low deposit loans generally offer a very competitive interest rate and can be very flexible. 

Low deposit home loans are often the first choice for first home buyers looking to get into the market with a small deposit, but they may also suit investors and people looking at debt consolidation.

You may need to meet stricter criteria to qualify for a low deposit loan.

First home buyers in 2010 are pretty financially savvy, but they often still need guidance and reassurance, and that’s something a good mortgage broker can supply in abundance.


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