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FHB surge as ‘it’s now cheaper to buy than rent’
Record-low interest rates mean that it is now cheaper to buy than rent, with first home buyers taking advantage, doubling their participation in the market, a big four bank CEO has said.
FHB surge as ‘it’s now cheaper to buy than rent’
Record-low interest rates mean that it is now cheaper to buy than rent, with first home buyers taking advantage, doubling their participation in the market, a big four bank CEO has said.
With the official interest rate at a record low 0.1 per cent, NAB CEO Ross McEwan pointed to a surge in first home buyers, even though the capitals are currently in a hot market.
In a media interview with 2GB, Mr McEwan said that contrary to popular sentiment, low interest rates have not priced first home buyers out of the market.
“Well, an interesting thing about first home buyers – there are more first home buyers getting into this market than we’ve seen probably for the last five to 10 years,” the CEO said.
“On our book alone, about 16 per cent of new lending is going to first home buyers. Traditionally, that was about half that amount. So, first home buyers with low interest rates are finding it cheaper to actually buy as long as they’ve got a deposit. And the government’s been very helpful there – it’s cheaper to buy than it is to rent because interest rates are so low.”
The CEO pointed out that prices are spreading, with buyers looking to purchase within one hour of major CBDs.
The exodus from metro areas has seen buyers take advantage of working-from-home arrangements, swapping inner-city apartments for larger freestanding dwellings.
“We’re seeing a big trend of people moving out of the city, and house prices out of the main centres are going up much higher than those in the inner city,” Mr McEwan said.
Despite rising house prices, the head of the big four bank still does not believe the RBA will be looking to lift rates in the near term.
“Look, I think rates are going to stay low for the next two to three years. The Reserve Bank is pretty determined to keep them low for 2022-23, and I think that’s going to be the case,” he said.
Instead of lifting rates, the CEO believes the RBA and regulatory providers could take the heat out of the market through curing mortgage lending.
“Well, we’ve been making sure that we haven’t been loosening out on the strings of how do you get a home loan. And I think what my chairman is saying is that if this keeps going, he may see the RBA actually stepping into the marketplace and curbing certain parts of it. You’re seeing this happening in New Zealand at the moment. I’m not saying it’s going to happen, but there is a chance that if they see that,” Mr McEwan concluded.
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