Categorised | Money, Property

First homebuyers may be scared off by small rate rises

Mortgage Choice

Mortgage Choice

Mortgage Choice has surveyed First Homebuyers to get an understanding of what rate rises might mean for them and the property industry at large.

An increase of just two percentage points puts more than a quarter of Australians looking at their first home out of the race. However it should be noted with a rate rise and the fleeing of potential buyers will put downward pressure on property prices negating some of the downside risk.

The survey by Mortgage Choice shows that the majority of First homebuyers are buying to secure their  longtime financial security, and with the instability of the share market of recent times it’s no wonder Australian’s back the property sector.

The survey did raise a few concerns as Kristy Shepard from Mortgage Choice points out “The survey results also highlight a lack of consumer awareness regarding changes to lending criteria that now restrict property buyers from borrowing without a deposit. 8% of our respondents intended to borrow the full purchase price.

It’s not all doom and gloom, Kristy said, “It’s terrific to see our survey results showing up-and-coming first homebuyers acknowledge the long-term benefits property investment has to offer. Importantly, the majority understand that good savings and making lifestyle sacrifices get them into good habits and get them through the door sooner.”

How will they cope with interest rate rises?

“It was encouraging to find that, when asked to answer with a mortgage interest rate of 7% in mind, almost one quarter – 23% – of respondents said they could afford a rate increase of between four and five percentage points before they would give up on buying their first home in the next two years. Of these, a staggering 61% said they could afford a rise of above five percentage points,” said Ms Sheppard.

20% of respondents said they would drop out of entering the market if rates rose 3-4 percentage points, 29% would give if rates rose by 2-3 percentage points, 21% would if rates rose by 1-2 percentage points and 5% would if rates rose by 0.25-1 percentage points. 2% would give up at the next 25 basis point rate rise – as of Tuesday these people would no longer be looking to purchase their first home.

How will upcoming first homebuyers finance their purchase?

Tighter lending criteria is forcing all borrowers, not just first homebuyers, to meet tougher requirements such as providing evidence of genuine savings over consecutive months. The majority of first homebuyers-to-be are taking this advice on board and saving good-sized deposits before purchasing.

When it came to property financing, these were the responses:

  • <8% will borrow the full purchase amount (compared to 12% in 2009).
  • <19% will contribute 5% deposit and borrow the remaining (22%).
  • 34% will contribute 10% deposit and borrow the remaining (25%).
  • 8% will contribute 15% deposit and borrow the remaining (9%).
  • 17% will contribute 20% deposit and borrow the remaining (14%).
  • 12% will contribute more than 20% deposit and borrow the remaining (14%).

Other key findings

  • 65% will purchase their first property with a partner, friend or family member/s in a co-ownership agreement, in comparison to 71% in 2009.
  • 52% will purchase an established home, compared to 71% in 2009.
  • 51% have ‘some idea’ about the purchase process; only 12% said they were well informed.
  • 53% said their largest concern was the time it takes to pay off the loan and own outright.
  • The most common sacrifices being made in order to buy were: cut back on spending (96% this year, compared to 93% in 2009), miss out on a holiday (60% vs. 59%), purchase a less expensive property (31% vs. 33%) and take on an additional job (26% vs. 23%).
  • The most popular predicted mortgage size range for these first time buyers is between $300,001 and $400,000, as indicated by 33% of respondents.
  • The most popular first point of contact for mortgage advice was a mortgage broker at 24%, then parents (22%). In 2009, brokers ranked first at 29% with the internet second at 18%.

If you’re a First Homebuyer and looking to make a purchase get intouch with Mortgage Choice:
Call the customer service centre on 13 MORTGAGE, visit or or

About the Survey

Mortgage Choice, Australia’s largest independently-owned mortgage broker, commissioned the independent online nationwide survey in late February 2010, asking a range of questions about first home purchase plans. The last first homebuyer survey was conducted in February 2009.

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