Home loan landscape 'could be a mirage'

Although the Reserve Bank of Australia’s (RBA’s) continuing interest rate cuts are bringing a raft of new low-interest home loans on the market, hard-up first-home buyers may be racking up trouble for the future by getting hold of a loan.

Such is the warning of Martin North, the head of consulting at Fujitsu Australia, who has told ABC’s PM programme that first-home buyers need to be sure that they can handle the home loan repayments in the long-term.

"If they were to experience unemployment later in the year potentially, they may get themselves into some difficulty. They are also buying into a bit of a bubble," he warned, explaining that the first-home buyers grant may have distorted the true health of the Australian housing market.

Indeed, the latest figures show that first-home buyers now account for 30 per cent of all home loans approved in February, the highest proportion seen since 1991.

Many Australians may now also be encouraged to strap themselves into a fixed low-interest home loan after the RBA decided to make a smaller cut to the cash rate of 25 points, indicating that it might be thinking about putting down its scissors for good.

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