Renter protections could make it easier to save for a home loan

Collage of a renter balancing on different height red bars.

Saving enough for a home loan deposit can be a significant challenge if you’re a renter. According to CoreLogic, rents surged more than 10% last year, recording an average $52 weekly increase, or an extra $2,727 yearly. That’s a huge drain on your cash flow if you want to become a homeowner, especially with average rents soaring to sky-high levels. 

“Saving for a deposit can mean thinking about things differently, like renting further out where it’s cheaper or moving back home with parents,” explains  the chief customer officer at Great Southern Bank, Megan Keleher.

“In fact, one of the biggest hurdles to home ownership is building the deposit, which is why Government support through initiatives like the Home Guarantee Scheme is so important in helping Australians to buy their own home.”

Luckily for Victorians, rent increases are capped at 10%, and they can only be lifted once a year. States like NSW or Queensland, however, have no limits on how high landlords can raise rents.

Indeed, a new survey from Great Southern Bank reveals tenants in Victoria feel much more confident about their ability to save for a home loan deposit, with 40.4% of participants saying they could do it in five years. 

This is significantly ahead of NSW (28.2%) and Queensland (33%), who along with Victoria have the largest average mortgage sizes in Australia. This isn’t to say Victorians have it easy, but they may have it easier, which is good news for the state in the middle of its population boom.

“Rents, inflation, and the cost of living are all making it harder to save for a deposit – whether you live in Melbourne or regional Victoria,” says Keleher.

“Melbourne has recently overtaken Sydney as Australia’s largest city and against that backdrop, it’s encouraging to see that optimism about owning a home remains high.”

So could strong renter protections be the key to home ownership?

Why rental stress hurts the Australian property market

Collage of two renters sitting on either side of a speech bubble well.

According to Great Southern Bank’s survey, buyers who successfully saved for a mortgage downpayment across all three states paid either low or no rent. 

Over half of survey respondents (56.2%) claim they paid less than $600 a week, while 17% paid no rent at all. For those forking out more than $800 a week, however, deposit-saving is a struggle. 

The size of a home loan deposit matters enormously, not just for how much you can save up front, but for all the costs associated with paying off a mortgage. The size of a home loan deposit can determine everything from the properties someone can afford to their monthly mortgage repayments

Having a large deposit can be cost-saving, too, since large deposits (LVR < 80%) are seen as less risky by mortgage lenders. As a result, lower LVRs come with lower interest rates on home loans. 

But according to the Reserve Bank of Australia (the entity responsible for all the recent rate hikes), rental stress is rising at a rapid clip – particularly among young and lower income Australians. This could worsen the existing housing affordability crisis, since it prevents renters from easily jumping into the property market.

“While a percentage of people find a way to save for their deposit without renting, for many the reality is that renting is often a stepping stone for people saving for their deposit,” explains Keleher. Instead, Australia may need to rethink its relationship to renting if it wants more Aussies to buy homes.

RELATED: How to handle the awful rental market

According to housing experts, this could include measures such as a nationwide cap on how much landlords can raise rents in a given period, or an end to no grounds evictions. This could level the playing field for all who want to buy. 

“Renting can be one of the largest weekly expenses for those saving for a home, and a healthy rental market – with a good supply of affordable rental accommodation – will help them successfully budget and save for their new home,” concludes Keleher. 

Indeed, if renting vs. home-ownership became more of a lifestyle choice than a necessity, it could strengthen both property markets for the better. Germany’s thriving rental market has long been credited with holding the country’s property prices steady through booms and recessions, which benefits both landlords and tenants alike. 

But until those rental reforms come through, Australian renters have to get creative about how they navigate the property market and compare home loans. 

Compare home loans for first home buyers below.

Compare first home buyer home loans - last updated 20 April 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Express Home Loan

    Owner Occupier, Principal & Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.01% p.a. variable
    6.14% p.a.

    Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

    Compare
    Details
  • 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
    6.24% p.a. variable
    6.26% 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

* 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.