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While first home buyers have had to save more for a house deposit, young buyers have remained persistent, the franchise brokerage has said.
Franchise brokerage Loan Market released new research yesterday (18 June) that found that first home buyers (FHBs) are borrowing $73,894 more than they did before the pandemic, with the average FHB now borrowing $511,209 compared to $437,315 pre-COVID-19.
FHBs are also paying an extra $1,207 a month in mortgage repayments (based on a 6.4 per cent interest rate over 25 years), totalling $3,420 up from $2,213 pre-pandemic, according to Loan Market.
The franchise brokerage revealed that FHBs are having to save, on average, $83,837 for a deposit, which is 16.74 per cent more (or $12,022) compared to 2019–20.
As house prices have increased, interest rates have hiked, and buyers have grappled with a cost-of-living crisis, FHBs have remained resilient, making up a significant market share of owner-occupied loans.
The Australian Bureau of Statistics (ABS) Lending Indicators revealed that FHBs made up 37 per cent of owner-occupied loans in April 2024 reflecting an increase of 5.2 percentage points since March 2020, when FHBs made up 31.8 per cent of all new owner-occupied commitments.
Despite the challenging economic landscape that FHBs have faced, Loan Market revealed that only 3 per cent of FHBs have purchased through guarantor loans and only 2 per cent have taken up lenders mortgage insurance (LMI) to receive a loan with a deposit of less than 20 per cent.
Loan Market’s figures found that the average LMI payment for FHBs has increased from $6,535 to $11,174 since the pandemic, an increase of 71 per cent.
Loan Market broker Youeil Shol said that LMI is a “necessary evil” for some FHBs looking to enter the property market: “They have to weigh up the risks: is it better to pay the extra insurance now and get into the market, or go back and try to build up their deposit but potentially watch property prices rise?”
Shol stated that many Australians are not aware of the ins and outs of guarantor loans: “A lot of people don’t realise that guarantor loans are temporary – you can remove your parent’s security from the loan once you’ve developed equity in your property, which might take three, four or five years.”
FHBs have not turned away from the dream of home ownership, according to the Loan Market broker. “First Home Buyers still want to get into the market and are finding ways to overcome current challenges,” he said.
Shol continued that FHBs have found it “harder than ever” to pull together a deposit as rents have “gone through the roof” and prospective buyers have had to make sacrifices in order to save or find alternative options.
He concluded, speaking on the benefits of FHBs using a broker: “Lenders want to see strong savings habits to meet the increased serviceability. As brokers, we can show them how their living expenses play a significant role in whether they get approved for a loan or not.”
[Related: Brokers are helping FHBs find new ways to enter the market]
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