Firstly, the Morrison government announced on the campaign trail that his party would allow first home buyers to borrow up to 95 per cent of a property’s sale price.
Further, The Australian Prudential Regulation Authority has floated removing the 7 per cent repayment guidelines. This means investors won’t be assessed on loan serviceability with an interest rate as high as 7 per cent.
Combined with a likely cash rate cut next week, Graham Cooke, insights manager at Finder, believes first-time property investors may finally get an opportunity to break into the market.
“There’s a perfect storm brewing for first home buyers. Property prices are dipping, lenders are dropping their rates and a first home buyer’s scheme is on the cards,” he said.
“After 31 months of no change, all signs are pointing to a cash rate cut next Tuesday. The expected move is causing a flurry of rate drops among lenders, especially on the fixed home loan front,” said Mr Cook.
Are the lenders passing on the cuts?
Lenders such as Bankwest, Ubank, CUA, Greater Bank and ME Bank have all cut the mortgage rate, according to Finder’s research.
The credit providers are also adding to their product lists, with 40 lenders providing 333 products across the market.
What should mortgagees expect?
Finder warns that while first-time investors have favourable conditions, they should ensure they can make repayments if rate hikes happen in the future.
“Firstly, borrowers should also be careful here. A lower deposit will add more cost to your loan in the long term, and the increased risk to the bank may mean a higher interest rate,” said Mr Cooke.
“While we’re on the verge of a new historically low cash rate, what all borrowers need to consider is that rates will – eventually – go up. With that in mind, you should always factor in a 2-3 per cent buffer on top of your current home loan interest rate to accommodate for future rate hikes if and when they do happen,” said Mr Cooke.
Tips to fast-track a deposit
- Take advantage of the First Home Buyers Scheme: As of 1 January 2020, the scheme allows a 5 per cent deposit as collateral for a mortgage. While the policy is capped at 10,000, it allows first-time investors the option to get a loan sooner.
- Maximise savings: Regularly check the interest rates on term deposits and choose the most competitive.
- Limit guilty pleasures: Limit costly habits such as the morning coffee, nights out and takeout.