Loans to first home buyers now make up a lower proportion of all home loans nationally than ever before. According to RP Data figures, the proportion of owner occupier housing commitments taken on by first home buyers slipped to 12% as of September 2014, a figure even lower than that recorded following the global financial crisis or the recession of the early 1990s. The question is, why are first home buyers opting out of the market in such large numbers?
Opinions are varied as to what the specific drivers of the decrease may be, with some experts pointing to an increase in property prices and associated costs as one key factor. The Housing Industry Association (HIA) recently published a report on the cost of stamp duty nationally and found that the bonus incentives offered to first home buyers in the form of state grants are being offset by stamp duty costs.
“Stamp duty adds hugely to household indebtedness by forcing monthly mortgage repayments upwards,” said HIA economist Shane Garrett. “Reform aimed at reducing the burden of the tax must become a priority for state and federal governments.”
Other research suggests that the younger generation is currently more comfortable with renting a home rather than buying, and would rather wait until they have a sizeable deposit that will get them a better home loan rate.
A potential light at the end of the tunnel for first home buyers could come next year, with several economists now tipping a further rate cut from the Reserve Bank of Australia (RBA) in 2015. If the RBA cuts the official interest rate, and major lenders pass on the savings to borrowers, this could lead to lower costs for buyers looking to lock in their first home loan.
How a Choice Home Loans broker can help
If you’re a first home buyer and are wondering whether you can afford to enter the current property market, Choice Home Loans can help. Our experienced brokers work with up to 30 lenders, big and small, to help find a loan to fit your circumstances and budget. Make an appointment online to speak to your local Choice Home Loans broker today.
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