First Home Buyers Held Back By Savings
First home buyers are struggling to purchase property because of a lack of savings, not because of competition from property investors, according to a survey by leading mortgage broker Loan Market.
The online survey of its 450 brokers which asked, ‘What is the number one issue keeping first home buyers out of the market’, found that 68 per cent of brokers selected low deposit and savings and 21 per cent chose a lack of government incentives.
Loan Market director Mark De Martino, said that with the property market running hot, first home buyers were competing with other buyers armed with equity and savings. However with the right preparation and guidance, first home buyers could even the playing field.
“The biggest disadvantage most first home buyers have is they’re often younger and haven’t had the same amount of time to build up equity and savings as those purchasing their second or third homes,” Mr De Martino said.
“What first home buyers need to do early is save for a deposit. A larger deposit doesn’t necessarily mean you can borrow more and buy a bigger property, it means you can have equity in your home from day one and also avoid loan costs like Lenders Mortgage Insurance (LMI),” he said.
Mr De Martino said that most first home buyers at Loan Market were meeting with a mortgage broker before they starting inspecting properties. This means they can understand how certain loan products work and the savings to be made if they had a bigger deposit.
“There are a variety of loan products that benefit first home buyers, however they aren’t all equal and depend on your savings level. The product you initially thought was for you, may not be as competitive if your deposit size changes,” Mr De Martino said.
Mr De Martino also stressed the importance of first home buyers getting pre-approved for a home loan before they started their property search.
“Pre-approval gives a first home buyer the confidence to attend an auction and bid on it with the peace of mind they can afford the property and the repayments,” he said.
Only six per cent of the brokers surveyed said property investors were the main reason first home buyers were being kept out of the market.
“Property Investors certainly have the benefit of existing equity in their home and certain tax advantages. First home buyers can best compete with them by building up their savings and deposit sizes,” Mr De Martino said.
What is the number one issue keeping first home buyers out of the market A) deposit and savings 68% >B) income levels 4% C) property investors 6% D) lack of government incentives 22%