Hopes were lost for first home buyers to restore life back to the home loan market, as Australia’s leading financial comparison website RateCity.com.au found the proportion of first home buyers ended mortgage season with an eight-and-a-half-year low.
Australian Bureau of Statistics (ABS) Housing Finance figures, released on Monday January 14, 2013, show first home buyers made up 15.8 percent of all home loans financed in November 2012, the lowest level since July 2004.
Spring is traditionally the busiest time of year for the property and mortgage markets however it appears this did not prove enough to offset the changes to government incentives. There were 7921 first home buyer home loans written in November, which was 2051 less than November 2011.
The lower demand followed home buyer incentives for existing properties in several states ending in October and being replaced by bonuses for new properties only.
Michelle Hutchison, Spokesperson for RateCity, said the report follows research by RateCity which found first home buyers are limited to lower-end properties.
“The past year has been tougher for first home buyers and the ABS figures prove that they have serious concerns about entering the market, despite lower interest rates making home loans more affordable.
“The cost of buying a home would be overwhelming for many first home buyers as RateCity found that an average income earner can afford to buy a home worth about $276,000 while the average Australian household is limited to a property worth about $342,000.
“That’s a big difference to average property values, as RP Data shows the eight capital city aggregate median dwelling price is $483,000, almost double the recommended maximum value the average income earner can afford,” said Mrs Hutchison.
Recommended maximum property values based on average incomes
Source: RateCity.com.au, See notes at the end for methodology
Mrs Hutchison said prospective first home buyers that are in a good position shouldn’t be discouraged from entering the property market this year.
“Don’t let fewer grants and high average costs deter you from buying your first home if the time is right for you. If you have a stable income, have saved a decent deposit and stick to your budget, borrowers could take advantage of the low interest rate environment and slow lending market to save significantly on entering the property market this year.
“Use comparison websites like RateCity.com.au which can help you calculate how much you can afford to borrow, research the home loan market and compare deals. Lenders are willing to negotiate so don’t be afraid to ask for a discount!”
– RateCity calculated maximum property values based on:
- ABS full time adult total weekly earnings (May 2012) and gross household income weighted (2009-10, 2% inflation added per year to 2012)
- Maximum monthly home loan repayment based on recommended maximum 30% of gross income towards repayments
- Interest rate based on current average (rounded) of 6% and 2% buffer added (8%)
- Loan size based on 8% interest rate and maximum monthly repayment
- Property value based on loan size plus 10% deposit
– RP Data figures as at December 31, 2012
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