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As first home buyers are faced with increasing challenges in saving for a deposit, many are exploring alternative options supported by the third-party channel, according to a new study.
According to lenders mortgage insurance (LMI) provider Helia, nine out of 10 first home buyers believe that saving for a deposit has become more difficult, a sentiment that has grown over the past few years due to rising house prices.
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In fact, around 88 per cent of respondents expressed that the dream of owning their own home is now harder than ever, with 76 per cent of the 335 surveyed in June 2023 admitting to feeling a sense of hopelessness.
Several factors have contributed to this setback for new home buyers, including record-high interest rates, higher inflation levels, and increased living costs.
The ANZ CoreLogic Housing Affordability Report 2023 indicated that the time required to save for a deposit reached an average of 10.5 years in March 2023.
Despite these challenges, the study also revealed that first home buyers are exploring unconventional approaches to achieve their home ownership goals, recognising the significance of home ownership security.
Helia’s chief executive Pauline Blight-Johnston said: “First home buyers understand the long-term financial benefits of home ownership and are motivated to find ways to achieve this goal.”
For example, 73 per cent of respondents are contemplating options such as lenders mortgage insurance (LMI), while 39 per cent are exploring rent-to-own arrangements.
Additionally, co-ownership (36 per cent), support from the Bank of Mum and Dad (34 per cent), and government schemes (30 per cent) were also being considered.
Around 47 per cent of prospective home buyers are actively researching and searching for a property to purchase within the next quarter, indicating a strong desire to enter the housing market.
The survey underscored the crucial role of mortgage brokers in securing home loans for buyers, particularly given the demanding process of applying for a mortgage and the escalating costs of debt, with more than 81 per cent of home buyers recognising the value that mortgage brokers provide.
In fact, 54 per cent of recent home buyers in the survey had used a mortgage broker, with 62 per cent rating brokers as a trusted source of credit information.
Despite the exploration of alternative options, the survey revealed that only 17 per cent of respondents had a documented budget that they adhere to. Additionally, only 26 per cent consistently saved a significant portion of their income.
This aligns with recent findings from Aussie, which reported that nearly one-quarter of home owners (23 per cent) are allocating over 50 per cent of their income toward mortgage payments, with an alarming 11 per cent using over 70 per cent of their total income for monthly home loan repayments.
Consequently, households are left with less disposable income for savings and contributions to superannuation funds.
[Related: Aussie urges brokers to be proactive]
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