“[Saving a 20 per cent deposit has] really become unrealistic for a lot of people, the expansion of the scheme is … an admission that it’s very hard, and getting harder,” said Richard Whitten, editor of home loans at Finder.
First home buyers were often encouraged to cut back on small daily pleasures and buckle down on spending to save a deposit, Mr Whitten said. But such sacrifices barely made a dent in the time taken to save a deposit, given property prices nationally climbed 18.2 per cent over the past year to $738,975, on the latest CoreLogic figures.
First-home buyers have been turning to government guarantee schemes, and family help, to get into the market sooner. Credit:Stephen McKenzie
Prospective homebuyers in Sydney would need to give up 52,191 takeaway coffees to save enough for a median home deposit, Finder modelling shows, or skip more than 11,000 meals out. Their Melbourne counterparts would need to skip about 35,700 coffees or some 8050 meals out before the savings equated to a 20 per cent deposit.
“People fixate on coffee or brekkie out, but that doesn’t help that much, it’s overall budgeting,” he said, noting larger scale switches like finding a more affordable rental or moving back home with family, where possible, had a much greater impact on savings.
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Though buying with a smaller deposit resulted in higher repayments, and more money spent on interest, first-home buyers would still be better off buying sooner rather than later in a rapidly rising market, Mr Whitten said.
However, with price growth flattening, the pressure on first home buyers had eased slightly, and those close to a 20 per cent deposit might decide to spend a few more months saving rather than rushing to purchase now.
Mr Algar is already seeing some first home buyers, mostly those able to live in the family home, now delaying plans to purchase, deciding they would rather keep saving as prices were no longer running away from them.
“[They’re more likely to] say I’ll sit tight because I don’t think I’ll pay any more for a property in a year’s time,” he said.
For those close to a 20 per cent deposit, a few more months saving could give them greater lending options, Mr Algar said. For a smaller deposit, getting to at least 10 per cent, could see a big reduction in LMI costs.
He had yet to hear concerns from first home buyers about the risk of falling into negative equity, if they purchased with a small deposit in a cooling market, but felt it was something they should be mindful of.
Mortgage broker Anthony Landahl, managing director of Equilibria Finance, said some first home buyers were sitting back on their hands, but more due to affordability constraints, and he expected to see a pickup in activity with the expanded government scheme.
With interest rate hikes on the horizon, some first home buyers may be reluctant to borrow as much as they previously might have, but he felt there would still be many who borrowed to their full capacity.
More than half of his first home buyer clients were not saving a 20 per cent deposit, and those who needed assistance were more likely to turn to family help than the government schemes, which had limited availability, and price caps that were too low in some markets.
Do you really need to save a 20 per cent deposit?
Source: Philippines Alive
