First home buyers set to pounce as rate cut looms

29 May 2019, Sydney, Australia - With a cash rate cut looking almost certain next week, first home buyers are gearing up to make their elusive move into the property market, according to Finder, Australia's most visited comparison site.

Finder has witnessed a 55% rise in visitors to first home buyer guides so far this month compared to May 2018.

It's the biggest spike in visitors to those pages in 12 months, coinciding with a long-awaited potential rate cut – the first change to the cash rate in almost 3 years.

Graham Cooke, insights manager at Finder, says first home buyers may finally get their opportunity to break into the market.

"There's a perfect storm brewing for first home buyers. Property prices are dipping, lenders are dropping their rates and a first home buyer's scheme is on the cards.

"After 31 months of no change, all signs are pointing to a cash rate cut next Tuesday. The expected move is causing a flurry of rate drops among lenders, especially on the fixed home loan front."

In the last week alone, seven lenders have lowered their rates on more than 48 owner-occupier fixed and variable home loan products.

Looking at the whole month of May, Finder analysis reveals this swells to 40 lenders across 333 products.

Lenders such as Bankwest, UBank, CUA, Greater Bank and ME Bank are among those that have cut rates.

Currently, the lowest variable home loan rate on the market is just 3.29% (Mortgage House Home Loan Prime – Early Bird Rate Cut Special), while TicToc's 1 Year Fixed rate, at 3.39%, is the lowest fixed available, indicating competition is heating up.

Cooke urges property hunters to make sure they consider possible rate hikes down the track.

"While we're on the verge of a new historically low cash rate, what all borrowers need to consider is that rates will – eventually – go up. With that in mind, you should always factor in a 2–3% buffer on top of your current home loan interest rate to accommodate for future rate hikes if and when they do happen.

Aussies who have just started saving up a deposit could look to take advantage of the First Home Loan Deposit Scheme, says Cooke.

"Firstly, borrowers should also be careful here. A lower deposit will add more cost to your loan in the long term, and the increased risk to the bank may mean a higher interest rate.

"However, the potential savings from this scheme could be significant. First home buyers in Sydney could be getting on the ladder with just $45,000, which does put the Great Australian Dream back on the cards for many."

Deposit required under First Home Loan Deposit Scheme

Source: Finder, Core Logic 2019

Tips to fast-track your deposit

• Take advantage of the First Home Loan Deposit Scheme: Set to kick in on 1 January 2020, the scheme will allow first home buyers to purchase a home with a 5% deposit. Though it's capped at 10,000 borrowers, it gives an opportunity for those who might not have a sizeable deposit saved to make their move. Under this scheme first home buyers can avoid paying lenders mortgage insurance (LMI) – a saving of around $10,000.
• Maximise your savings: Make sure your deposit is earning as much interest as possible in a high interest savings account or term deposit. For savings accounts, regularly check your rate to make sure you're on the most competitive in the market. Make your savings work harder for you!
• Limit your guilty pleasure: Skip the daily cup of coffee, nights out, UberEats and costly habits, or at least set yourself a limit. Cutting back for a period can quickly boost your deposit.
  Move back in with your parents: This might not be everyone's cup of tea, but paying less rent or having the bank of mum and dad subsidise living costs is a great way to save.