First-home buyers, here’s how you can lower your deposit hurdle.

The past 18 months has been the most lucrative for sellers in the Adelaide Hills. But trying to enter the real estate market at this historic time hasn’t been easy. Lenders are requiring bigger deposit requirements, reducing accessibility to the market. This ‘deposit hurdle’ isn’t just a 2020/21 problem.

Date:

28-Jul-2021

Category:

Buying

Tags:

Author:

Amanda Smith

First-home buyers, here’s how you can lower your deposit hurdle.

The past 18 months has been the most lucrative for sellers in the Adelaide Hills. But trying to enter the real estate market at this historic time hasn’t been easy. Lenders are requiring bigger deposit requirements, reducing accessibility to the market. This ‘deposit hurdle’ isn’t just a 2020/21 problem.

30 years ago, you needed to save less than two years’ worth of monthly mortgage payments to build a 20% deposit. Today, the target deposit takes about four years to save – a period that’s doubled thanks to the present environment and capital growth.

It’s a catch 22: you need to be in the property market to grow the interest on the money you’ve invested, but it’s harder than ever to get a foothold in. So, existing owners enjoy the low interest rates and mortgage repayments, while first-home owners scramble to save money (while renting a property) or rely on ‘the bank of Mum and Dad.’ The latter isn’t always possible.

This isn’t just affecting young Australians 

The lack of accessibility for people entering the market is having flow-on effects. Home ownership rates across the nation have fallen with a lower percentage of homeowners than years before. This begs the question: if house deposits are the bottleneck, are they really necessary?

For lenders, yes. House deposits protect the bank if the borrower defaults. In this scenario, the 20% house price deposit acts as a buffer, to help the bank recover if they were to foreclose the loan. The deposit also signifies the strength if a borrower. In the eyes of the lender, if you’re a first-home owner and was able to save 20%, it’s likely you’ll repay the loan diligently.

Where to from here? It’s a two-pronged solution.

There’s no doubting the power of Government intervention. Over the past year, by dropping the deposit requirements to as little as 5%, there was a large influx of first-home owners. We need to see more low deposit schemes like this.

These initiatives have limitations though, such as the number of places (10,000 a year), income levels and price eligibility. It’s important for lenders to rethink deposit requirements and we’re starting to see innovations in this space. NAV UBank, for example, only require a 15% deposit on standard loan products.

The Government can also make it easier to build new homes, as the population increases in certain areas. Mount Barker, for example, as it’s one of the fastest growing regional areas in the country.

With all this said, it’s essential to marry these top-end initiatives with doing everything you can to get your foot in the door. Cracking the property ladder isn’t easy, but once you’re in, you’ll be in a much better position. Aim to enter the market, even if your first home doesn’t quite match your goals. The hardest park is breaking into the market. This should be your focus – and we can help you get there. 

Our team of real estate agents happy to answer any questions or offer advice to help you get into your first Adelaide Hills property. First-home buyers, get in touch with us.

We’re with you for life, from your first house to your last.