Falling interest rates ironically locked out first-home buyers from the property market, according to a new study by the Australian Housing and Urban Research Institute (AHURI).
Curtin University Professor Rachel Ong ViforJ said over the 25-year period between 1994 and 2017, the average interest rates on owner-occupier loans feel by almost 5%, which resulted in the substantial growth in housing demand and prices.
“Falling interest rates may seem appealing to first home buyers, but in real terms, it only increases competition and pushes prices higher, sometimes out of reach for those trying to get into the market for the first time,” she said.
The AHURI study found that almost one-third of the price rises were caused by lower interest rates. Other factors such as housing availability, wages, and population growth accounted for the remaining increase.
Given these, around 84% of aspiring first-home buyers do not have enough savings for a home deposit.
Furthermore, 71% are unable to meet the mortgage repayment requirements, hindering them from entering the housing market.
On top of this, nearly nine in 10 potential first-home buyers are locked out of the market due to borrowing constraints.
In looking at ways to help first-home buyers, the study analysed two forms of assistance that can be provided: a mortgage guarantee scheme and a shared equity program.
Ms Ong ViforJ said while both can be helpful, a shared equity scheme is likely to be more accessible to people on lower incomes, especially given the context of the current Home Guarantee and the Help to Buy schemes.
“It is important to understand that while these schemes would support people living in lower socio-economic status areas, they would likely also boost demand for housing in these entry-level markets,” said Professor ViforJ.
“Furthermore, it is imperative the introduction of any such schemes is matched by an increase in the supply of local housing in order to avoid fuelling further house price rises.”
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 STAR CUSTOMER RATINGS |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure | |||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% |
| Disclosure |
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Photo by Monster Ztudio on Canva.
Collections: Mortgage News Interest Rates
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