Now Is The Perfect Time For Australian First Home Buyers To Enter The Market

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First home buyers who missed the opportunity to enter the property market in 2009 are in the prime position to make their first purchase, particularly in the new home sector, as the FHB market returns to more “normal” conditions in 2010. Aussie founder and executive chairman Mr John Symond said the Reserve Bank’s recent decision to hold interest rates stable following its February meeting, and subsequent comments from Governor Glenn Stevens point to rates being kept at relatively low levels for some time.

“The RBA’s move to not lift rates in February is hugely significant and is great news for Australian homeowners,” Mr Symond said. “It has given confidence to Australian consumers that interest rates won’t skyrocket.”

First home buyers who missed the opportunity to enter the property market in 2009 are in the prime position to make their first purchase, particularly in the new home sector, as the FHB market returns to more “normal” conditions in 2010.

Aussie founder and executive chairman Mr John Symond said the Reserve Bank’s recent decision to hold interest rates stable following its February meeting, and subsequent comments from Governor Glenn Stevens point to rates being kept at relatively low levels for some time.

“The RBA’s move to not lift rates in February is hugely significant and is great news for Australian homeowners,” Mr Symond said. “It has given confidence to Australian consumers that interest rates won’t skyrocket.”

Mr Symond said now was the best time for first time buyers to enter the market as last year the FHB sector was out of control, as the boost to the FHB grant spurred overly eager buyers to pay more than market value for their first property purchase.

“In many metropolitan areas, prices for properties in the first home buyer range were inflated due to increased demand,” Mr Symond said. “Over-excited first home buyers were paying up to $50,000 more for a property just to get their $14,000 grant.”

“There were stories coming out of the property market of queues of people lining up for open houses and real estate agents not even allowing prospective buyers to view homes unless they had proof they had their finances approved. This was a crazy situation and one which can only lead to inflated prices.”

Figures from the Australian Bureau of Statistics show the heat has come out of the FHB market with the percentage of FHBs as a percentage of owner occupied purchasers dropped from 28.5 per cent in May to 22.1 per cent in November.

According to RPData, median home prices fell slightly in December by 0.3 per cent as the seasonal impact of the summer slowdown combined with rising interest rates and fading first time buyers finished off a bumper year for property growth with national values up 11.5 per cent annually.

Mr Symond said Australians looking to buy their first home were now well positioned to enter the market, and are still entitled to the standard $7000 grant, but other incentives are available and may vary from state to state.

“For those worried they may have missed the boat with the bonus grant, I believe they are now the ones in the best position to negotiate a good price on their first home,” he said. “If I was a first home buyer I would have waited until the bonus grant had ended, because now is the smart time to buy.”

Mr Symond said new homes are where the real bargains are as builders are still offering special deals and incentives – as are state governments – to entice buyers to build their own home.

“As there is a shortage of new homes, builders and state governments are falling over themselves to get new buyers into that market,” he said. “There are many fantastic initiatives on offer, but I caution potential homebuilders to do extensive homework when entering into a contract to build a house. “

“You need to know exactly what is included in the costs, such as floorcoverings or landscaping, as you don’t want to be up for any extra expenses when the house is finished.”

Mr Symond said purchasers of established homes also need to carry out a number of tasks before they commit to their first property including: extensive research and due diligence on any property they are interested in purchasing; and, ensure they have a realistic budget and have factored in whether they can cover their mortgage following future interest rate rises.

He said there can be traps for young people jumping into the market without the discipline of saving and having a financial buffer to cover their mortgages if their circumstances change, such as starting a family and losing an income.

Mr Symond said the best thing a potential first home buyer should do is to see a mortgage broker in order to assess their finances and find the right loan for them.

“Buying your first property is one of the most exciting, and at times scary, things a person can do,” he said. “It’s imperative they enter the world of home ownership on the front foot, with the right lender and the right loan for their circumstances and an Aussie broker can help them achieve that.”
An Aussie broker will offer guidance, assess eligibility, lodge the application and then support the first home buyer borrower through the home loan process. They can also assist with applying for the FHB Grant. Aussie brokers are available 24 hours a day, seven days a week, in all capital cities and regional centres at the request of customers who call Aussie on 13 13 33.

As one of the country’s largest non-bank providers of financial services, Aussie has a loan book of over $35 billion. With the acquisition of Wizard, there are now over 150 retail shopfronts and 850 brokers across the country ready to help customers get a better deal on their finances.

Aussie’s tips for first home buyers

Here are some important tips to help avoid the most common traps:

1) Work out how much you can afford to spend before you even look, and only look at apartments or homes clearly advertised within that price range. Do not waste your energy looking in the wrong suburb – because you may end up biting off more than you can chew.

2) Look at as many properties as possible in your price range to get an idea of what you can afford. Check with Aussie’s skilled mortgage advisers to work out what loan product suits your needs – especially your borrowing limit!

3) When working out the best home loan for you, check the ongoing payments, especially in the fine print for monthly service fees and other charges.

4) If you are worried about interest rate rises, you can split your loan between variable and fixed rates and take an “each-way” bet.

5) Make fortnightly payments, not monthly, thereby saving thousands on the mortgage.

6) Remember a low start-up interest rate, or honeymoon rate loan may not mean you will be paying less for your property in the long term.

7) Make absolutely sure your home loan repayments do not overly impact on your lifestyle. You do not want to only eat baked beans for dinner for the next 25 years.

8) Be prepared for the monthly repayments to rise and fall during the life of your loan. Make sure there is some financial room to move if rates rise. If rates fall keep paying the same amount each month or fortnight, so you pay off your loan quicker by eating into the principal owing.

9) The best step you can take in the search for your first place is get pre-approval for a loan, which Aussie and some other lenders can provide, so you know exactly what you can afford.

10) If you are looking at buying a new home, carry out due diligence and confirm what is included in the total price.

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Brooke Stoddart
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