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How first home buyers are rushing to take advantage of Australia’s falling house prices

Posted: 9 July 2018 1:13 pm
News

Young couple in their new house.

It's a buyer's market in many cities. Here's how you can take advantage of falling prices and protect against rate rises.

Months of property data confirms that prices really are dropping from their historic highs, especially in Sydney and Melbourne. In the words of Corelogic's Tim Lawless "We’re already in a buyer’s market in both of these cities".

If you're a struggling first home buyer this is very good news. And here's how you can take full advantage of it.

Consider low deposit loans and guarantor options

If you're keen to jump into the market as soon as possible a low deposit mortgage allows you to get finance with just a 5% deposit. You'll just have to pay lender's mortgage insurance on top.

Even better, getting a parent with equity in their property to go guarantor could allow you to get a loan with a 5% deposit and avoid mortgage insurance. This obviously isn't an option for everyone, but it can be a great strategy for the right buyers.

Compare some guarantor and low deposit loans below

Data indicated here is updated regularly
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
$0
$0 p.a.
90%
$2,000 to $3,000 refinance cashback
Get a competitive variable interest rate with no application fee or ongoing fees. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
IMB Budget Home Loan - Special LVR  ≤90% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.78%
2.84%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
Yard Variable Home Loan - LVR 90% (Owner Occupier, P&I)
2.65%
2.68%
$0
$0 p.a.
90%
A competitive variable rate for home buyers with 10% deposits saved. Optional offset account (with $10 monthly fee).
HSBC Home Value Loan - Promotional Offer LVR 90% (Owner Occupier, P&I)
2.69%
2.70%
$0
$0 p.a.
90%
A competitive value home loan with no ongoing fee.
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Data indicated here is updated regularly
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)
2.49%
4.12%
$595
$0 p.a.
90%
A fixed rate loan which allows extra repayments, and charges a low application fee.
Greater Bank Great Rate Home Loan - Construction Loan (Owner Occupier, P&I)
3.66%
3.67%
$0
$0 p.a.
95%
Fund the construction of your new family home with a very competitive variable interest rate. Available with a 5% deposit.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Aussie Select Basic Fixed Rate Home Loan - 1 Year Fixed LVR over 80% (Owner Occupier, P&I)
3.09%
3.42%
$0
$0 p.a.
95%
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier, P&I)
2.59%
3.86%
$595
$0 p.a.
95%
Split you home loan for free with one of the lowest fixed home loan rates.
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Get creative with your deposit saving

Getting your foot in the door as a first home buyer means saving at least a 5% deposit. And there are more ways to do this than you probably think:

  • First home owners grant. If you're eligible for the FHOG in your state you can use this to form part of your deposit.
  • Cash gift or inheritance. A gift (not a loan) or inheritance can form part or all of your deposit. The only catch is that most lenders require at least 5% of the deposit to be your own genuine savings. But if the gift makes up between 10% or 20% of the deposit this might not be a problem.
  • Sell some shares. You can sell shares and use the cash for a deposit. If you've had the shares for over six months it's usually considered genuine savings.

Do your research

Now more than ever, hopeful buyers need to research price trends for the properties and suburbs they wish to buy in. Falling prices are good news, but these drops aren't evenly distributed across all property types and areas.

Make sure you don't pay too much for a property in a falling market. And be sure you can handle paying off a property that may not rise in value in the short term.

In other words, don't count on quick capital gains. A strategy that has worked well for property investors in a rising market won't work in a falling one.

But if your goal is to own a home then short term falls in value aren't the end of the world. Just know that a falling property value limits the amount of equity you can build and gives you fewer options if you want to upgrade or refinance.

But what if interest rates rise?

To protect yourself against rate rises you should take the following steps:

  • Compare loans and get the lowest rate possible. Limit your repayments by finding a mortgage with a low rate. It's as easy as looking at the products in the table above and sorting by interest rate.
  • Calculate how rate rises will affect your repayments. You must assume that interest rates will rise at some point. Use our loan repayment calculator and see how higher rates affect your repayment costs. Can you handle an extra $100 a month? An extra $400?
  • Consider fixing your interest rate. Fixing your rate means it will be a little higher than the lowest variable rates on the market, but you'll know exactly how much you're paying for the fixed period.
  • Watch your rate and refinance when it rises. The biggest mistake Aussies home buyers make is failing to switch to a cheaper loan when their rate rises. It's a competitive market, and there's often a cheaper product out there. Switching your mortgage is easier than you think and can save you thousands.

The property market always offers opportunities and challenges for every type of buyer. The important thing is to arm yourself with the necessary knowledge through research and comparison.

All your first home buyer questions answered

Compare more home loans from across the market

Data indicated here is updated regularly
$
% p.a.
Offset account
Split account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback.
A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.39%
2.39%
$0
$0 p.a.
60%
A very low variable rate for home buyers with 40% deposits or equity. This rate takes effect from 30 September for new and existing customers. You can get this rate if you apply today.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
2.68%
2.69%
$0
$0 p.a.
80%
$2,000 to $3,000 refinance cashback.
Get a competitive variable interest rate with no application fee or ongoing fees. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.44%
2.46%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
2.39%
2.40%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
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