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Information verified correct on October 22nd, 2016

Only 1 in 10 home loans likely to be first home buyers by 2015

  • All 18 experts in’s monthly Reserve Bank survey were correct with today’s cash rate pause
  • Despite no move, first home buyers are dropping, expected to hit just one in 10 loans by 2015
  • How to get on the property ladder in a tough market

July 1, 2014, SYDNEY - First home buyers are running for cover and the outlook is expected to worsen, despite the Reserve Bank keeping the official cash rate on hold today for the ninth consecutive board meeting, according to one of Australia's biggest comparison websites

An analysis of Australian Bureau of Statistics (ABS) data by shows that there are fewer first home buyers now than there were before the government introduced grants in an effort to stimulate the market.

The proportion of first home buyers has hit a new record low of 12.26 percent out of all loans financed in April. This is almost half the proportion of first home buyers hitting the market compared to before the First Home Owner Grant scheme was introduced in July 2000. Back then, the proportion of first home buyers from 1991 to 2000 generally ranged between 20 percent and 25 percent (see graph below).


It follows one of Australia's biggest monthly surveys by of 18 leading economists and experts including from all four major banks – ANZ, Commonwealth Bank, National Australia Bank and Westpac – who were all expecting the cash rate to remain on hold today.

The survey also found that the majority (11 out of 18 or 61 percent) of respondents are expecting the Reserve Bank to increase the cash rate within the next 12 months, while six of these respondents believe it’s likely the cash rate will rise by the end of this year.

Fred Schebesta, Director at, said that the outlook is expected to worsen, as interest rates are likely to rise, discouraging even more prospective first home buyers from entering the market.

“The forecast is looking bleak for many Australians who are already struggling to get onto the property ladder.

“Even though the cash rate has sat at a record low of 2.50 percent for almost a year, it hasn’t encouraged more Australians to enter the property market. In fact, we’ve seen a decline in the proportion of first home buyers out of all loans financed since the cash rate began to fall in November 2011. From this time the proportion of first home buyers has dropped from 20.21 percent to 12.26 percent.

“At this rate, the proportion of first home buyers is expected to drop to about one in 10 (11.26 percent) of all home loans financed by 2015 (based on average month-on-month growth rate of the past two years).

“While the government grants have shown little impact in stimulating the first home buyer market, there is still hope for prospective buyers who want to own their home but are struggling with the costs. For instance, you don’t even need a deposit if you have a guarantor and there are many home loans out there with as little as 3 percent deposit.
“The key is to do your research and buy within your budget – you could end up saving money by entering the market before interest rates are set to rise.” tips on how to enter the property market:

  • Have a guarantor to avoid a deposit: If you have a family member who has agreed to be a guarantor you may be able to avoid saving a large deposit and having to pay Lenders Mortgage Insurance (LMI). All big four banks allow guarantors on home loans but it’s worth looking at the conditions of going guarantor and the risks involved as it could mean the guarantor's home is in jeopardy of repossession too if repayments can’t be made.
  • Capitalise LMI so you don’t have to pay for it upfront: If you have a deposit less than 20 percent of the property value, you will have to pay LMI but most lenders allow you to capitalise it into the loan. This means it will be added onto your loan and therefore you will pay higher monthly repayments. If you have a 5 percent deposit for a $300,000 home you would either pay $7,210 upfront, or if you capitalise it you would pay an extra $55 added to your monthly repayments. Be aware that capitalising it into your loan will cost more over the long-run.
  • Compare home loans with maximum LVR of 97 percent and above: There are 173 home loans in the database with a maximum Loan-to-Value Ratio (LVR) of 97 percent which means you don’t necessarily need a massive deposit to be approved for a loan. For instance, if you went for a $300,000 loan you would only need a deposit of $9,000. However, you need to be mindful of the risks and other costs involved such as lower equity which can be an issue if the value of the property falls, paying LMI, upfront fees like application costs and any additional out of pocket expenses.
  • Search for a property within your budget: Finding a home or unit that is within your budget is another option to get into the market sooner. This can include a smaller home such as a unit or a cheaper location further from city centre.
    upfront fees like application costs and any additional out of pocket expenses.
  • Compare home loans to find the cheapest deal that suits your needs: Comparing loans can make a huge difference to your repayments making it easier for you to manage your finances. Using the average variable rate is 5.32 percent for a $300,000 loan, you could save about $46 per month or almost $17,000 over 30 years by finding a home loan 0.25 percentage points cheaper. Currently, variable rates on start from as low as 4.54 percent, so do your research before you jump in.


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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's review pages for the current correct values.

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