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The latest Mortgage Business Sentiment Survey has highlighted a division in broker opinion over the federal government’s strategy to attract first home buyers into the market.
Many brokers have seen their volumes swell off the back of increased first home buyer activity in what is an otherwise a flat market.
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But feedback from the latest broker sentiment survey has revealed concern in some quarters that first home buyers are creating a false market.
Nathan Daniell, director of West Australian-based Simplify Your Mortgage, said the First Home Owners Grant (FHOG) had falsely stabilised the bottom end of the market and allowed many young people with no savings to buy a home.
“This may backfire in years to come if more job losses occur and rates go back up,” he warned.
The federal government announced the FHOG boost in October. Since then, there has been a marked increase in first home buyer activity.
According to ABS data for January 26.5 per cent of all new loans are now taken out by first home owners.
Chris Secomb, a broker with South Australian brokerage Lending Solutions, said that by trying to avoid pain in the near term, the RBA and the federal government were “setting us up for much worse… five years from now”.
“I think that while the banks winding down their LVRs and their policies on a weekly basis is an irritation, I truly believe that it is likely to be the kindest policy in the long run,” he said.
But while there are concerns about the impact of future rate hikes on first home buyers, brokers also recognise that many borrowers will benefit from the current incentives.
“I believe that this is a perfect time for first home buyers… my only concern is that they enter into a contract now, knowing that they are only scraping in and when rates increase they will struggle with repayments,” said Lee Dittmer, a finance strategist with Victorian-based Who Finance.
Gerald Hopgood from South Australia’s Karana Financial Services said the South Australian market represented good value for money, offering cheap housing for first home buyers who “can now realise their dream”.
