First home buyer activity slumps to year low

Staff Reporter

The number of first home buyers entering the market has fallen by approximately 40,000 in the last 12 months, new research has revealed.

According to data from RateCity, in the 12 months to July 2011, around 90,000 first home buyers financed a dwelling, compared to nearly 130,000 in the 12 months to July 2010.

RateCity chief executive officer Damian Smith said the slump in FHB activity could be largely attributed to higher interest rates.

“Average variable interest rates have increased by 33 basis points and the gap between the Reserve Bank’s cash rate and the benchmark basic variable rate – which is the average of the major four banks rates – has widened by 8 basis points since July 2010,” Mr Smith said.

“Largely because of higher rates, the typical first home buyer is paying $61 per month more in mortgage repayments than 12 months ago.

“However, average household income has increased by almost $3,600 since July 2010, which means that repayments make up about the same percentage of income compared to last year,” said Mr Smith.

In support of this, the most recent Genworth Homebuyer Confidence Index suggests that most first home buyers are in fact coping with their monthly repayments, with nearly 60 per cent believing they will easily meet repayments, and only 15 per cent citing difficulties in the year ahead.

The slow mortgage market has created real opportunities for prospective first home buyers, according to Mr Smith.

“If you’ve got a 10 per cent deposit, a solid track record of savings, and confidence in your employment outlook, it’s a very good time to borrow. There are some exceptionally low three-year fixed rates on the market, but we also know that lenders are willing to negotiate on variable interest rates and fees.”

Staff Reporter

The number of first home buyers entering the market has fallen by approximately 40,000 in the last 12 months, new research has revealed.

According to data from RateCity, in the 12 months to July 2011, around 90,000 first home buyers financed a dwelling, compared to nearly 130,000 in the 12 months to July 2010.

RateCity chief executive officer Damian Smith said the slump in FHB activity could be largely attributed to higher interest rates.

“Average variable interest rates have increased by 33 basis points and the gap between the Reserve Bank’s cash rate and the benchmark basic variable rate – which is the average of the major four banks rates – has widened by 8 basis points since July 2010,” Mr Smith said.

“Largely because of higher rates, the typical first home buyer is paying $61 per month more in mortgage repayments than 12 months ago.

“However, average household income has increased by almost $3,600 since July 2010, which means that repayments make up about the same percentage of income compared to last year,” said Mr Smith.

In support of this, the most recent Genworth Homebuyer Confidence Index suggests that most first home buyers are in fact coping with their monthly repayments, with nearly 60 per cent believing they will easily meet repayments, and only 15 per cent citing difficulties in the year ahead.

The slow mortgage market has created real opportunities for prospective first home buyers, according to Mr Smith.

“If you’ve got a 10 per cent deposit, a solid track record of savings, and confidence in your employment outlook, it’s a very good time to borrow. There are some exceptionally low three-year fixed rates on the market, but we also know that lenders are willing to negotiate on variable interest rates and fees.”

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