Low Rates, High Risk? Is now a good Time for First Home Buyers to Enter the Market?
The answer is quite complicated. You see, the COVID-19 pandemic almost dipped Australia into recession, affecting almost every sector in the economy. However, the property market showed resilience in the face of the crisis and was able to stand strong and many people, especially first home buyers still sought mortgage brokers for their first home loans. The thing is, with low-interest rates, especially on first home loans, coupled with government schemes geared towards helping first home buyers, it is only natural for these buyers to wonder whether it’s time to enter the market, or are they too late. Of course, the decision on whether to buy a home should be based on individual financial circumstances and market ones as well. In this article, we will analyze all these details, which will in the end give you an idea regarding the direction you want to take.
The bigger picture
As we mentioned above, interest rates in Australia are at their record lowest, as the RBA (reserve bank) has made continuous assertions on the unlikeliness of negative interest rates in the country. What this means is that if you are a first home buyer, paying off your first home loan is actually more appealing than rent payments. Property prices went down significantly and it’s attributed to mortgage deferrals as well as taking advantage of government stimuli such as job seeker and job keeper.
The stimulus initiatives are planned to be wound back, but the extended financial recovery coupled with the ongoing pandemic is putting financial pressure on people who lost their jobs or whose employment got affected. There is also an indication of buyers exiting the market with the clearance rates in the main cities such as Melbourne and Sydney gradually falling over time
So, the low competition environment, low-interest rates, and government incentives are for sure tempting many first time home buyers. However, that only one aspect of the full situation.
Taking advantages of the stimulus
Considering the many incentives that are designed to stimulate the Australian economy, the property landscape is rapidly changing, which is obviously good news to mortgage brokers as well as first home buyers. What’s more, there are federal schemes introduced by the government targeting first homeowners. For instance, the HomeBuilder program provides home owners/occupiers – including first-time homeowners – a $25,000 grant for renovation or rebuilding of their homes. And with the government having streamlined the lending system, things can be looking any better than this for first home buyers.
The country’s economic recovery
There are so many factors that are shaping the property market and are all very appealing to property buyers. However, before you decide whether to invest, as a first time home buyer, or not, you have to ask yourself about the economic recovery in Australia, as it’s also super important. Here is the thing, if the economy recovers well from the pandemic, with government stimulus supporting many people and businesses across the country until things improve, you will likely witness the minimal impact on prices. But considering the jobkeeper and jobseeker recent pay cuts and the closing of mortgage holiday periods, the housing prices might be significantly impacted.
Now, there is something that you need to keep in mind, yes, the low-interest rate, streamlined lending process, low competition, and the incentives from the government might be very tempting to property buyers, especially first home buyers, but, looking at it from another angle, you would realize that the government did all these as a response to increased unemployment levels in the country, which is an all-time high. What this means is that the market is yet to settle, and so, as a first-time homebuyer, your need to be cautious. In such a market, things can take a turn to the worst pretty quickly, and so, you might end up losing your investment. Before you make a move, seek guidance from a mortgage broker, as he/she will help you determine if it is possible to make the investment, or whether it is worth it.
Wait till you are ready!
Even considering all of the above, the best time to make an investment is when you are financially ready and keen to buy. What we mean by this is that, even with a mortgage, you need to feel that you can be able to pay off that mortgage – if you know what I mean. Before you even seek help from a mortgage broker, first do your research and prepare yourself well. Then, find a home that suits your needs the best and in a location you like, and let the broker help you from there.
Still wondering whether it is a good time to make your move, give us a call, and we promise to guide you through the entire process. We won’t put you in a position that you could lose your investment, so you can expect honest answers from us.
If you’d like to speak to your trusted Mortgage Broker , call Uplift Accounting – Home Loans division in Mulgrave on 03 8510 7527 to schedule an appointment or submit your enquiry via our contact us form.
About Uplift Accounting
Uplift Accounting is a boutique tax practice headquartered in Mulgrave, Melbourne. A team of qualified and well-experienced tax accountants, bookkeepers and mortgage brokers in Uplift Accounting will help you navigate your personal and business tax affairs smoothly.
We work Australia-wide whilst we have a couple of local offices.
From our main office in Mulgrave, we serve our local communities in Mulgrave and surrounding suburbs: Notting Hill, Dandenong, Dandenong North, Glen Waverley, Mount Waverley, Chadstone, Clayton, Cranbourne, Oakleigh, Oakleigh East, Springvale, Wheelers Hill, Keysborough, Lilydale, Lyndhurst, Mulgrave, Narrewarren, Noble Park, Mentone, Hughesdale, Clarinda, Huntingdale, Bentleigh East, Ashwood, Ashburton.
Our office in Croydon serves the local communities in Croydon and surrounding suburbs: Ringwood, Nunawading, Bayswater, Berwick , Burwood, Cheltenham, Chirnside Park, Lynbrook, Mooroolbark, Croydon, Mitcham, Croydon South.
With the use of modern technology, we help individuals and businesses all across Australia. Online accounting, bookkeeping and mortgage brokering solutions combined with our virtual communication technologies have given us the edge to meet our client needs without physically meeting them in our offices.
To learn more or book an appointment, contact us or call us on (03) 8510 7527.