First home buyers shunning property market, favour renting
- Triple the number of first home buyers have given up on buying compared with last year: finder.com.au Home Loan Insights Survey
- All 37 experts in the finder.com.au Reserve Bank Survey were correct with cash rate prediction
- Still hope for first home buyers: good time to jump in with record low interest rates!
December 2, 2014, Sydney, Australia – Despite no change to the official cash rate today, more Australians have given up on the property market with triple the number of first home buyers preferring to rent than commit to a mortgage, following new research by one of Australia’s biggest comparison websites finder.com.au.
The finder.com.au Home Loan Insights Survey of more than 1,000 Australians (released today), found that almost one in three (32%) would prefer to rent than commit to buying a property. This is compared to last year’s survey where just one in ten (10%) would rather rent than buy.
There was also an increase in the number of Australians who are staying home, with 14 percent admitting that it's easier to live with their parents, compared with 10 percent last year.
Michelle Hutchison, Money Expert at finder.com.au, said the low interest rates have had little impact on first home buyers.
"We weren't surprised that the Reserve Bank left the cash rate unchanged today, as all 37 leading experts and economists in the finder.com.au Reserve Bank Survey were forecasting the cash rate would hold at 2.50 percent. Despite the cash rate pause for the 15th consecutive board meeting, it has done little to renew first home buyer activity.
"Our Home Loan Insights Survey found that first home buyers aren’t in a hurry to jump into the property market, with fewer first home buyers planning to save a smaller deposit to get onto the property ladder sooner. Last year, about two in three (62 percent) were planning to save a smaller deposit to buy a home sooner but now, 41 percent would buy a property with a smaller deposit.
"Saving enough for a deposit is still the biggest concern for prospective homebuyers, with about two in five (38 percent) finding it difficult to save. Although this has dropped from the survey results last year, where 51 percent of respondents couldn't save enough for a deposit,” said Mrs Hutchison.
The survey showed a positive sign of improved consumer confidence, as fewer Australians are concerned they won't be able to meet mortgage repayments – 16 percent as opposed to 29 percent last year.
This mood is likely to change, with the finder.com.au Reserve Bank Survey forecasting interest rates to rise next year.
The property market is also earmarked to continue rising through 2015, while most of the 37 experts on the panel (64 percent) are expecting the same number of first home buyers to hit the market.
“This is concerning because it's the lowest level of first home buyers we've ever seen,” said Mrs Hutchison. “In fact, the latest Housing Finance figures from the Australian Bureau of Statistics (ABS) analysed by finder.com.au shows that the proportion of first home buyers hit a new low of 11.98 percent out of all home loans financed in September 2014.
“There were 6,339 first home buyer loans financed in September – 1,760 fewer loans financed compared to September 2011 when the cash rate was 4.75 percent and before it began to fall (from November 2011).
"There is still hope for first home buyers who want to get into the property market. Property is one of the safest and best long-term investments because it's likely to rise in value over a long period of time, so it's worth considering your options.
“Most lenders will allow you to borrow 95 percent of the property value and capitalise lenders mortgage insurance into the loan, which means a deposit of just $15,000 for a $300,000 property. Interest rates are at record lows, starting at 4.48 percent for variable (by loans.com.au) and 4.49 percent for three-year fixed terms (by Newcastle Permanent) and with rates expected to rise it's likely to be the cheapest time to afford a mortgage."
finder.com.au’s top variable rate home loans:
Home loanAdvertised rateComparison rate
|loans.com.au Dream Home Loan||4.48%||4.50%|
|Newcastle Permanent Premium Plus Package (min loan size 250k)||4.62%||4.97%|
|CUA Fresh Start Home Loan||4.65%||4.66%|
|RAMS Discount Home Loan (1st year)||4.65%||4.99%|
Source: finder.com.au, based on lowest ongoing advertised rates, comparison rates based on $150,000 over 25 years
finder.com.au’s top three-year fixed home loans
Home LoanThree-year fixed rateComparison rate
|Newcastle Permanent Fixed Rate Home Loan||4.49%||5.30%|
|ME Bank Standard Fixed Rate Home Loan||4.59%||5.18%|
|Greater Building Society Ultimate Fixed Rate Home Loan||4.59%||5.22%|
|IMB Fixed Rate Home Loan||4.69%||5.28%|
Source: finder.com.au, based on lowest advertised rates, comparison rates based on $150,000 over 25 years
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
More than 3 million Australians turn to finder.com.au every month to save money, time and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.
Our free service is 100% independently-owned by two Australians: Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.
We continue to expand and launch around the globe, and now operate in the United States and United Kingdom. For further information visit www.finder.com.au.