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Higher interest rates, tougher lending conditions and the end of the boosted federal government grant are combining to drive many first time buyers out of the property market, a recent survey has found.
According to a broker survey conducted by Loan Market Group, 86 per cent of brokers said a lack of genuine savings was the single biggest reason applications from first home buyers were being declined.
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Of the 215 mortgage brokers surveyed, 11 per cent also said “failing credit scoring” was a major reason for banks “terminating” a home loan application.
“These can be a lot of little things which by themselves are minor but cumulatively can cut a swath of destruction through an application,” Loan Market Group’s national operations and risk manager Ivan Karamatic told The Adviser.
According to Mr Karamatic, buyers had been able to use the boosted First Home Owners Grant as a contribution to their deposit but this had become more difficult since the concession returned to its traditional level of $7,000.
A Loan Market online survey of prospective first home buyers found 60 per cent of respondents had put plans to buy a property on hold because of the end of the expanded grant scheme.
Of the 260 first home buyers surveyed, 32 per cent said they were trying to save for a larger deposit while 28 per cent said they had put their plans on hold indefinitely.
But while the number of FHBs has dropped off considerably since last year, Mr Karamatic said FHB activity was still relatively high as good purchasing opportunities were still available.
“33 per cent of those surveyed said they were still looking to buy a property this year,” he said.
“I think we will see the level of FHB activity head back to historic averages, but not just yet. There is still a fair bit of urgency in the market. Property prices are starting to boom and, as such, some FHBs are thinking ‘I better buy now’. So I think there are still a lot of opportunities for brokers to capitalise on this market.”
