Why first home buyers are racing into the property market now
On Tuesday, the Australian Bureau of Statistics (ABS) released data that revealed that the volume of first home loans has jumped to the highest point since late 2009.
According to the data, in December of last year, the amount of first home loans for owner occupiers crept up by 6.2%, which equated to a monthly total of 9,606 loans. And the last time there was a larger monthly total was the same time of year ten years ago.
Nationally, these new numbers account for almost a third (30.2%) of all owner occupier loans taken out in December across the country.
“The good news is that First Home Buyer activity has stepped up even further since the start of this year,” Master Builders Chief Economist, Shane Garrett said.
“The new First Home Loan Deposit Scheme is already a big success and the official data will show more big gains for First Home Buyer once they are released.”
The First Home Loan Deposit Scheme was introduced by the Federal Government in 2019, and aims to help first home buyers get into the property market sooner by removing the burden of Lenders Mortgage Insurance (LMI) for borrowers with a deposit as little as 5%.
10,000 slots for the scheme opened earlier this year across 27 different mortgage lenders, and according to the National Housing Finance and Investment Corporation (NHFIC), 10,000 more spaces are set to be created in July 2020.
RELATED ARTICLE: 7,000 more slots to open with the First Home Loan Deposit Scheme
But for Mr Garrett, the new government initiative isn’t the only reason we are seeing an increase in first home loans.
“There is a great opportunity for people to buy or build their first home at the moment,” he said
“Apart from the assistance offered by the new First Home Loan Deposit Scheme, interest rates are at their lowest in many decades and house prices have stabilised after dropping back from the highs reached in recent years.”
Let’s take interest rates for example. According to Mozo’s database, the average first home variable rate for owner occupiers on the 1st of December 2019 was 3.85%, while at the same time 5 years prior (1 December 2014) the average rate was 5.26%.
So if you took out a loan of $400,000 over a 30 year term in 2014 at the average rate you’d end up paying $396,065 in interest over the course of the loan. If you took out the same loan in 2019 at 3.85%, you’d pay $275,084 - that’s a $120,981 difference.
RELATED ARTICLE: Australia’s best refinance home loans for 2020
The ABS data also broke down the amount of first home loans state-by-state, which proved that the ratio of first home buyers to other owner occupiers was at least a quarter across all the states and territories.
The highest ratio was in Western Australia (43.2%) while the lowest came from their neighbours in South Australia (25.7%). Here’s a how the other states scaled up:
State/Territory | First home loans (% of owner occupier market) |
---|---|
New South Wales | 30.5% |
Victoria | 40.9% |
Queensland | 31.4% |
South Australia | 25.7% |
Western Australia | 43.2% |
Tasmania | 27.6% |
Northern Territory | 38.4% |
Australian Capital Territory | 32.6% |
However, in terms of volume, the largest number of loans came out of Victoria with just over 3,500, followed by New South Wales which recorded just under 2,500 loans.
RELATED ARTICLE: Why 2020 is the year of the first home buyer and property investors
Looking for your first home loan? Check out the table below or jump over to our first home loan comparison tool for more providers.
-
Promoted
Fixed Home Loan
- Owner Occupier
- Principal & Interest
- LVR <95%
- Interest rate
-
5.69
%
p.a.
Fixed 2 years
- Comparison rate
-
6.34
%
p.a.
- Initial monthly repayment
-
$4,174
Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.
- interest rate
-
1 year - 6.19% p.a. (6.45% p.a.*)
2 years - 5.69% p.a. (6.34% p.a.*)
3 years - 5.69% p.a. (6.28% p.a.*)
4 years - 5.89% p.a. (6.30% p.a.*)
5 years - 5.89% p.a. (6.27% p.a.*)
- Fixed loan revert rate
-
6.34% p.a.
- Upfront fees
-
$799
- Ongoing fees
-
$6.00 monthly
- Discharge Fee
-
$350.00
- Package
-
-
- Maximum loan to value ratio
-
95.00%
- minimum borrowing amount
-
$10,000
- maximum borrowing amount
-
$5,000,000
- type of mortgage
-
Fixed
- Repayment types
-
Principal & Interest
- Availability
-
Owner Occupier
- Repayment options
-
Weekly, Fortnightly, Monthly
- Extra repayments
-
yes - free up to 1 year in advance
- Redraw facility
-
yes - free
- Minimum redraw amount
-
$500.00
- Offset account
-
no
- Split account
-
yes
- Other restrictions
-
Monthly fee only applies to fixed period of loan.
- Other benefits
-
-
- Special Offers
-
$4,000 cashback for loans $750,000 and above with a maximum LVR of 80%, settled within 90 days of application for refinancers or 180 for purchase loans. $3,000 for loans between $500k and $749k, $2,000 for loans between $250k and $499k.
Read reviews and learn more about IMB Bank home loans
Go to site
-
Fixed Home Loan
- Owner Occupier
- Principal & Interest
- LVR <95%
- Interest rate
-
5.69
%
p.a.
Fixed 2 years
- Comparison rate
-
6.34
%
p.a.
- Initial monthly repayment
-
$4,174
Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.
- interest rate
-
1 year - 6.19% p.a. (6.45% p.a.*)
2 years - 5.69% p.a. (6.34% p.a.*)
3 years - 5.69% p.a. (6.28% p.a.*)
4 years - 5.89% p.a. (6.30% p.a.*)
5 years - 5.89% p.a. (6.27% p.a.*)
- Fixed loan revert rate
-
6.34% p.a.
- Upfront fees
-
$799
- Ongoing fees
-
$6.00 monthly
- Discharge Fee
-
$350.00
- Package
-
-
- Maximum loan to value ratio
-
95.00%
- minimum borrowing amount
-
$10,000
- maximum borrowing amount
-
$5,000,000
- type of mortgage
-
Fixed
- Repayment types
-
Principal & Interest
- Availability
-
Owner Occupier
- Repayment options
-
Weekly, Fortnightly, Monthly
- Extra repayments
-
yes - free up to 1 year in advance
- Redraw facility
-
yes - free
- Minimum redraw amount
-
$500.00
- Offset account
-
no
- Split account
-
yes
- Other restrictions
-
Monthly fee only applies to fixed period of loan.
- Other benefits
-
-
- Special Offers
-
$4,000 cashback for loans $750,000 and above with a maximum LVR of 80%, settled within 90 days of application for refinancers or 180 for purchase loans. $3,000 for loans between $500k and $749k, $2,000 for loans between $250k and $499k.
Read reviews and learn more about IMB Bank home loans
Go to site
Your selected home loans
First home loans 2020
Promoted
loans.com.auEssentials Variable 90
Owner Occupier, Principal & Interest
3.04% p.a. variable
3.06% p.a.
Go to sitePromoted
Tic:TocVariable Home Loan
Owner Occupier, Principal & Interest
2.79% p.a. variable
2.80% p.a.
Go to sitePromoted
Newcastle PermanentDiscounted Variable Home Loan (Premium Plus Package)
Owner Occupier, Principal & Interest
3.19% p.a. variable
3.59% p.a.
Go to sitePromoted
Bank of Queensland2 Year Intro Rate Variable Home Loan
Owner Occupier, Principal & Interest
3.19% p.a.variable for 24 months and then 3.76% p.a. variable
3.80% p.a.
Go to sitePromoted
Heritage BankVariable Rate Loan (Home Advantage)
Owner Occupier, LVR 80-90%
3.47% p.a. variable
3.85% p.a.
Go to sitePromoted
Mortgage HouseRed Prime Home Loan
Owner Occupier, Principal & Interest
3.49% p.a. variable
3.56% p.a.
Go to site* 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.
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