Is 2023 shaping up as a chance for first time home buyers?

You’ve likely seen on the news that home prices have been in steady decline over the last year. So, maybe you’ve been thinking to yourself now might be the time to buy your first home. We look at some of the things you’ll want to consider.

Declining home values: the numbers

According to Corelogic’s latest research home prices across the capital cities have seen a continued decline on its Home Value Index.

Here’s a quick look:

As you can see from the above, there has been a consistent monthly dip, which perhaps presents a good opportunity for the right type of buyer. In truth, median prices in some suburbs are still relatively high, so it’s worth looking around to pick up a good deal. 

Lower home values have also been coupled with a lower proportion of “for sale” property listings, down 2.9% on the same time last year. This reduces the options available to buyers in some areas, though some suburbs have a lot on offer. 

There are some market challenges, though it’s not out of the question.

Figuring out your first deposit

Let’s say that you have the place you want to buy all figured out. There’s just one thing: your initial deposit. Prices in some capitals remain high enough that the first deposit will still be rather large. Consider that 20% of $1m is $200,000, for example. 

So it can be a challenge to achieve the typical 20% initial deposit in a big city location and you need to factor in how to meet this first task. Some home loan providers even ask for 40% up front, which is why it’s important to find a suburb that suits your budget. 

Now to ease the cost, you may be able to apply for the First Home Guarantee which allows you to take a loan with a 5% deposit without having to pay lenders mortgage insurance (LMI). However, always be sure to review your budget first as taking on a loan with a much smaller deposit can mean you end up paying a lot more interest over the long term.

Again, shopping around for a home at a good price plays an integral part in all of this and that’s why a declining market can be enticing (stamp duty also factors in depending on which state you live in).

What about my borrowing power?

Another thing to consider is what your borrowing power might be. Basically, borrowing power is a way of banks determining how safe of an investment you are for giving out a loan. This can be determined through a number of factors such as purchase history, savings, income, and credit score. Better borrowing power can help you broaden your property choice, potentially. 

How will all the interest rate hikes affect me?

The rise in interest rates can be beneficial for those who are saving and parking their money in a high interest saver. But what about those looking to buy a home? According to the RBA, new loans for owner occupier variable housing rates rose from 2.41% (average) in April of 2022 to 4.98% in December of 2022.

Now with the rate rise on February 7, even if you have a steady income and enough saved up to secure yourself a new loan, you’ll generally be paying more on a variable home loan interest rate – especially if more hikes are to come. So, the current landscape demands a good look over the numbers and thorough home loan comparison. There’s some number crunching to be done between lower overall prices and higher interest rates.

What’s the home buying verdict?

There’s no definitive answer on when to buy a home – the circumstances are different for everyone. A consistent income and a good level of savings are important so that you can at least begin to tackle the higher interest environment. With a sound budget and a good value home loan, you might just be able to take the plunge. However, if you’re just making ends meet, you’ll probably want to hold off until conditions get easier. Checking the numbers and also seeking some financial advice can be a good idea before moving forward. 

Are you a first home buyer that’s thinking of taking out their first loan? At Mozo, we list the best home loans on the market which can help you to make the best choice for your situation.

First Home Buyer Loans - last updated 29 May 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • First Home Buyer Loan Special

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.90% p.a. variable
    5.93% p.a.

    A low variable rate loan for home buyers. No establishment or ongoing fees to pay. 100% offset account included. Allows for unlimited repayments, redraws and flexible repayment options.

    Compare
    Details
  • Basic Home Loan Special Offer

    Owner Occupier, Principal & Interest, LVR 80-95%

    interest rate
    comparison rate
    Initial monthly repayment
    6.69% p.a. variable
    6.70% p.a.

    Compare
    Details
  • FHBG Special Offer Classic Home Loan

    interest rate
    comparison rate
    Initial monthly repayment
    6.19% p.a. variable
    6.21% p.a.

    Compare
    Details
  • Basic Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.94% p.a. variable
    5.99% p.a.

    Compare
    Details
  • First Home Buyer Variable Home Loan

    Advantage Plus, Owner Occupier, Interest Only, LVR >90%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    6.76% p.a.

    Compare
    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.