Record low interest rates are prompting quicker-than expected purchases from many first home buyers.
According to Finder’s First Home Buyers Report 2021, which surveyed 1,028 first home buyers, more than half (53%) are buying their home sooner than they had previously planned to, due to low interest rates.
The RBA has confirmed the official cash rate of 0.10% will not be raised until inflation reaches 2-3%, which is unlikely to happen for at least 12 months.
With the cash rate low and first home buyer home loans up 62% year-on-year according to ABS data, there are concerns property prices and household debt could approach unaffordable levels.
Sarah Megginson, home loans expert at Finder, said the housing market would always go through fluctuations, and it was important for buyers to not get caught up in the hype.
“If you’re worried about getting ‘priced out of the market’, take a step back and focus on your own goals.
“Take stock of your savings and create a plan. Can you cut down on unnecessary expenses to fast-track your savings? Would you consider another suburb, or another city where prices might be more affordable?
“There are so many ways to get into the property market and it’s not a race. You might even be able to do a joint venture with a family member or friend,” she said.
Megginson said that while rising property values and low rates have spurred many into action, buyers should take stock of the whole picture before they sign on the dotted line.
“It’s better to wait until you’re financially ready, than to take on a mortgage you can’t actually afford.
“It’s not just mortgage repayments you’re committing to pay, it’s also council rates and water, insurance, strata fees in an apartment, and any repairs and maintenance falls on you as well,” she said.
Finder’s research found nearly two-thirds of Western Australian first home buyers were most likely to jump on the cheaper cost of borrowing (62%), compared to less than half in South Australia (49%).
Men (60%) were more likely than women (47%) to say low interest rates influenced their decision to buy sooner than they were planning.
The data also shows investors (62%) are more likely than owner occupiers (52%) to have been influenced by low rates.
Parents are lending, giving, or underwriting record amounts for deposits to help their adult children buy their first home, making the so-called Bank of Mum and Dad one of Australia’s biggest mortgage lenders.
According to Finder’s First Home Buyers Report 2021, which surveyed 1,028 first home buyers, one in three (32%) rely on their parents for financial help, either with a deposit, loan or full purchase price.
That’s equivalent to 3,779 Aussie “kidults” who are relying on their parents for housing costs every month.
Finder’s research found that the so-called Bank of Mum and Dad – the colloquial term used to describe parental funding – is now Australia’s ninth-largest mortgage ‘lender’, lending or giving $29 billion in the past 12 months.
With house prices soaring around Australia, First Home Buyers, who don’t bring a “trade-in” to the market as established home buyers do, need to save thousands of dollars extra every week just to keep up with rising property prices.
As a result, First Home Buyers are getting practical and turning to dated properties in need of a renovation, as rapidly rising prices push them to compromise to get onto the property ladder.
According to Finder’s First Home Buyers Report 2021, almost four out of five are already planning to renovate their new home.
The research found one in five (22%) plan to renovate immediately after buying, while 30% will do so within the first 12 months.
A further 23% will undertake a home makeover within the first five years, followed by 5% who intend to renovate six or more years down the line.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.