Applying for a home loan isn’t a walk in the park for most first home buyers, especially when you’re dealing with low deposit, low income, and even insufficient documentation or requirements.

These will hinder you from progressing towards your homeownership goals, so it’s best to prepare and make adjustments early on. Set aside more money towards your savings, improve your credit score to impress lenders, and practise good money habits in preparation for the repayments you need to make once you’ve successfully applied for a home loan.

It would also be helpful to understand average home loan sizes, as they are an indicator of a changing property market, including house prices, government policies and grants available, housing trends, growth, and potential risks.

Average Home Loan Sizes in Australia

The following data are as of August 2023 based on the Lending Indicator report by the ABS.

While NSW, VIC, and ACT remain the states with the biggest home loan sizes, it is worth noting that the amount of loans in these locations has dropped compared to last year.

Either we’re seeing lower property prices during the period, or home buyers are able to put down a much larger deposit.

On the other hand, the rest of the other states are showing higher home loan sizes. This could be an indication of property growth, meaning home buyers are enthusiastic to buy, and there is enough supply to satiate the market’s demand.

Overall, the average home loan size in Australia as of August 2023 is $585K versus $589K in August 2022.

How much would your mortgage repayments be?

Now that you have an idea of the average home loan size in the state where you plan to buy a house, what does that mean for you and your monthly outgoings?

As mentioned above, it is helpful to understand your potential repayments. Find out if you can afford to make this commitment given your current financial situation because defaulting on your repayments means possibly losing your home as it can be repossessed by the bank.

If you want to learn more about repayments and how to calculate your own home loan repayments, you can use Lendstreet’s repayments calculator here.

Here’s a simple illustration of how much the repayments is going to be for a home buyer who will be purchasing a home in NSW:

Here is another sample illustration of the monthly repayments of a home buyer from QLD:

The numbers above offer an understanding of the financial commitment involved when taking out a home loan in the state where you want to buy. Factor them into your monthly budget and ask yourself if this is a responsibility you can sustain monthly for several years.

Lendstreet: Your Strategic Partner in Finding a Suitable First Home Buyer Loan

Interest rates are a huge factor in determining your repayments. As a first home buyer, you need a strategic mortgage broker by your side to help you find a well-suited home loan for your specific lending needs. Finding the best rates should be your trusted mortgage broker’s top priority, along with recommending home loan features and deals that will benefit you.

If you are planning to buy your first home and want to receive a sample illustration of repayments based on actual and prevailing interest rates from banks and lenders, you can contact us here. Meanwhile, we offer a free 20-minute mortgage consultation service directly provided by our lead mortgage broker. Choose your preferred schedule by visiting this link.

Attention homeowners: the Reserve Bank of Australia (RBA) has recently decided to maintain the cash rate target at 4.10 per cent. This choice follows a sequence of cash rate hikes implemented since last year, all to foster a more sustainable balance between supply and demand in the economy.

While inflation in Australia, though still elevated, has passed its peak, it is anticipated to remain high due to increasing prices for various services and persistent rent inflation. This development carries significant implications for potential real estate buyers, investors, and those contemplating home loans. Increased inflation can place stress on people’s actual income and impede household consumption growth, potentially influencing the ability to secure home loans and impacting the overall real estate market performance.

The RBA is determined to return inflation to its target range within a reasonable timeframe. They recognise that high inflation impacts savings, strains household budgets, and complicates business planning and investment.

According to the most recent data, inflation will soon be around 2-3 per cent. The RBA closely monitors worldwide economic trends, consumer spending patterns, labour market, and inflation outlook.

Closely monitoring market updates is crucial for those planning to buy or refinance their home loans. They must understand how market conditions impact their financial situation and future financial decisions.

At Lendstreet, we recognise the significance of staying informed about the latest economic and monetary policy developments. For up-to-date information and valuable home loan and real estate guidance, turn to Lendstreet. Subscribe to our newsletter here or book a free no-obligation one-on-one consultation with our trusted mortgage brokers here.

Amidst all the buzz about the cash rate and refinancing, another important topic deserves our attention: the Home Guarantee Scheme (HGS). This month, the National Housing Finance and Investment Corporation (NHFIC), together with the Commonwealth Bank (CBA), released key data demonstrating the outcome of the Home Guarantee Scheme over a 4-year period. Their findings are all very encouraging. Let’s take a look at what this report is all about.

In the dynamic landscape of fluctuating property values and the unpredictable rise and fall of interest rates, the Home Guarantee Scheme (HGS) is proving to be an effective tool for first home buyers to grow home equity. The data in the latest report from the National Housing Finance and Investment Corporation (NHFIC), together with a leading lender, shows that participants under the HGS have not only weathered these challenges but have also experienced a substantial growth of about $82,000 in property equity since the program’s inception in 2020. This outcome speaks volumes about the determination of these participants, who, with the strategic support provided by the HGS, have confidently navigated the path to homeownership, ultimately emerging stronger and more secure.

This is the statement of NHFIC’s Head of Research, Hugh Hartigan, in their latest press release dated 21 August 2023.

The outlook for the current financial year is promising, so first home buyers planning to finally enter the property market should be mindful of how the entire HGS program works.

Under the Home Guarantee Scheme (HGS) landscape, there are three different programs, tailored to assist first home buyers enter the property market sooner and with ease:

1. First Home Guarantee (FHBG): Through this program, the NHFIC guarantees a portion of the first home buyer’s loan with a participating lender. The NHFIC can guarantee up to 15% of the property’s value, but this guarantee is not a cash payment or a deposit for your home loan.

You still need to pay the deposit, but another salient feature of this program is that you can pay as low as 5% deposit without having to pay Lenders Mortgage Insurance (LMI). The First Home Guarantee can also be used in conjunction with the First Home Super Saver Scheme and other state and territory first home owner grants and stamp duty concessions.

This financial year, another 35,000 slots are available.

2. Regional First Home Guarantee (RFHBG): This program works very similarly to the First Home Guarantee, except it is for eligible first home buyers who have lived in a regional area during the preceding 12-month period or in an adjacent regional area. Interested applicants may check whether their suburb is listed as a regional area here.

It is important to note that if you are eligible for the RFHBG, you do not qualify for the First Home Guarantee. Home buyers who are not eligible for the RFHBG meanwhile, may qualify for the First Home Guarantee or the Family Home Guarantee.

The Regional First Home Guarantee offers 10,000 slots this financial year, so you should lodge your application on or before 30 June 2024.

3. Family Home Guarantee (FHG): The benefits of this program is meant for single parents and guardian of at least one dependent. Unlike the FHBG and the RFHBG, which allows a 5% minimum deposit for a home loan, the Family Home Guarantee instead allows 2%, which further eases the situation of individuals struggling to buy a home.

Another noteworthy feature of this guarantee is that it can be used by first home buyers or next home buyers, just as long as they are eligible and owner-occupiers. Property investors are not covered.

The FHG offers 5,000 slots only up until the end of June 2024.

Most first home buyers struggle with deposit. Typically, we associate this with low savings and low income. But in this report, we see that incomes have risen at a faster pace for those accessing HGS compared with the broader first home buyer market.

Sources:
NHFIC’s First home buyer insights – collaboration with CBA | August 2023.

This is good news!

On the other hand, and as further highlighted in the NHFIC report, participants of the Home Guarantee Scheme are borrowing less in relation to their income. Even if they have become eligible to borrow more, they are choosing to borrow less. The average loan amount under HGS increased by 4.7% only since 2020, while the average loan for the broader FHB market increased by a larger amount (13.4%) over the same time period.

Sources:
NHFIC’s First home buyer insights – collaboration with CBA | August 2023.

Another good news!

I am seeing consistent growth in first home buyers’ financial capacity. Higher income plus the capacity to pay more towards their house shows that first home buyers are a formidable group.

That is why my mission to assist first time buyers navigate the home buying process and take significant steps up the property ladder is one mission I take very seriously. Their resilience and determination amaze me, and as players in this tumultuous time in the property market, these are two traits we all need to practice more.

If you are a first home buyer, please take advantage of the Home Guarantee Scheme. Read more, ask more, learn more. Equip yourself with data and update yourself on property market movements. Look out for experts’ insights, and if you need help interpreting information, seek professional advice. If you need one, do not hesitate to reach out. I am available here on LinkedIn or through email at support@lendstreet.com.au.

Thank you for reading my article. Until next time.