First Home Buyers Making Savings Progress
Savings remains the main barrier for people entering the property market, although first time buyer savings levels have improved during 2012, according to a survey by leading mortgage broker Loan Market
Loan Market Corporate Spokesman Paul Smith said a survey of the company’s mortgage brokers found 65 per cent said insufficient savings was the number one reason preventing first home buyers from obtaining finance.
But Mr Smith said the situation had improved since late last year when the same survey found 84 per cent of brokers believed the savings issue was the major hurdle for first time buyers.
“The past year has been a historically dormant period for first home buyers so it’s a positive sign to see fewer first time buyers struggling to save,” he said.
“The biggest head start you can have on your home loan begins with maximizing your deposit. This can save you thousands on interest payments as well as charges such as Lenders Mortgage Insurance.”
Mr Smith said one of the main criteria for savings was for lenders recognising ‘genuine savings’, meaning the savings come broadly from settling aside income and demonstrating the ability to budget effectively.
“For many Gen-Y buyers this is a hugely positive sign that they’re creating budgets and sticking to them,” he said.
“First home buyers can benefit from using a mortgage broker as they can explain the benefits of saving for a larger deposit as well as negotiating better deals among lenders when that buyer has a higher deposit saved.”
Mr Smith said that there was lots of variation between lenders today in terms of not just rates and fees but how they considered savings and other credit criteria.
“The worst thing for a first home buyer to do today is just to go to their main financial institution and take pot luck with the limited loan options they are given,” he said.
“Some lenders apply larger discounts to ‘lower risk’ customers, giving mortgage brokers much more room to negotiate better rates if the customer has a larger deposit.
Mr Smith said 18 per cent of the 207 broker respondents said insufficient income to service the loan was the biggest hurdle – double the figure from the previous survey.
“Obviously cost of living factors are also an issue at the moment for those people looking to break out of the rent cycle and pursue their dream of home ownership,” he said.
Mr Smith said 12 per cent of those surveyed cited stable employment as the main obstacle while seven per cent said credit history.
What is the main reason for potential first home buyers failing to secure finance?
a) Insufficient savings 65% 84%
b) Stable employment 12% 1%
c) Insufficient income 18% 9%
d) Credit history 5% 6%