Why the first home buyer market is tipped for growth

Things may finally be falling into place for the first home buyer market, with declining property prices and industry and regulatory changes making that first step into the property market easier than it has been for a long time.

No more mortgage ‘stress tests’

Getting home loan approval can be a big hurdle for a lot of first time buyers, but the APRA has recently announced it will be softening rules around mortgage stress tests, which should make things a little easier for borrowers.

The ‘stress test’ meant that borrowers had to show they could afford repayments on a rate of 7.25 per cent – even though the real owner-occupied rates most banks charge is closer to 4 per cent.

Under the new rules banks can assume the rate will be the actual rate they actually charge on their mortgages, plus a 2.5 per cent buffer in case of future rate rises.

This new change will mean that borrowers will be able to take out larger home loans than they would have been able to previously.

House prices down

Not only can buyers borrow more, but house prices are also coming down. There’s no denying that the property market has slowed down considerably over the past year, giving buyers a good chance to snap up a bargain.

However it remains to be seen how long the property market will remain subdued. With the election now over, there is the possibility that some who were sitting on the sidelines waiting for results will now start making their moves, and that market sentiment will improve overall.

If you wanted to get in at the bottom of the market then now could be your best chance.

First home buyers scheme

First home buyers will soon be able to take advantage of the Coalition government’s election promise of a First Home Loan Deposit Scheme.

Set to begin from January 1 next year, the scheme will help eligible first home buyers purchase a house with a deposit of as little as 5 per cent.

The scheme is set to be capped at 10,000 loans per year and will available for single applicants earning up to $125,000, or couples with combined incomes of $200,000.

While it will mean that buyers will ultimately have higher loans to pay back, it will be able to help them move into their own home faster and save them from having to pay Lenders Mortgage Insurance.

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