First home buyers have highlighted the role that mortgage brokers played in assisting their entry into the property market, amid new research that has identified gaps in financial knowledge of Millennials.
Approximately 61 per cent of Millennials are unaware of how much they need to save for a home loan deposit, while more than a third (38 per cent) are looking to purchase a home within the next three years, according to ING’s new Millennial Homeownership Report.
The research, which involved a survey of 1,000 Australians aged between 22 and 37, also revealed that of the respondents that claimed they knew how much they needed to save, $76,000 was considered the average deposit needed to obtain a home loan.
However, ING’s head of retail, Melanie Evans, observed that in 2017, ING found that the average deposit required by FHBs was $135,000.
Speaking at an event hosted by ING on Wednesday (16 May), residential property manager at Rental Results Lauren Robinson and property investor Eddie Dilleen highlighted the role that mortgage brokers played in assisting them throughout their first home purchase.
Ms Robinson said: “They give you a really good understanding of how much you can actually borrow, so that was definitely my first step when I was looking.
“I just did not know how much I could borrow, and then I also really needed to know how much I needed to save and what my repayments were going to be, and then what was the cheapest no-frill mortgage rate option out there.
“I just wanted the best rate, the cheapest rate out there, and I felt like a broker was really able to help me find the best rate.”
Mr Dilleen, who purchased his first home at the age of 19, noted that brokers helped him decode mortgage jargon.
“When I first started looking to get my first property, I did touch base with a fair few different brokers,” the property investor said.
“One of the things that I didn’t understand was the nitty-gritty stuff. [Brokers helped simplify] the words that were out there.
“For example, I didn’t know what LVR was, how much money you need to have in savings, lenders mortgage insurance — nobody explained any of that to me.”
Moreover, the survey revealed that 57 per cent of Millennial respondents are cutting back on their spending in order to save for a home, with 88 per cent noting that they’re relying on home ownership for their financial security.
“Our research shows that Millennials are living for today, but are also planning for tomorrow,” Ms Evans continued.
“Millennials are often unfairly pictured as only living in the here and now, but they want what generations before them wanted: the security and financial stability that owning a home offers.”
Ms Evans also pointed to survey data that indicated that 61 per cent of Millennials acknowledge that their first home would be in a less established location, which she claimed was evidence of Millennials’ commitment to home ownership.
“Millennials are thinking about their future. They understand that owning a first home might mean purchasing in an unestablished area, taking a longer commute or prioritising practicalities over struggling to buy in inner city areas that are perceived to be more urban,” the head of retail said.
“However, it’s evident that they need help on how to go about saving for a deposit, with many unaware of how much they need to save.”
The ING report follows on from another study that suggested first home buyers will be the largest contingent of borrowers taking out a mortgage in the next year.
Nearly a third (30 per cent) of consumers taking out a home loan in the next year will be first home buyers (FHBs), according to an Aussie Home Loans survey of 600 Australians aged 24 to 55 who intend to take out a mortgage in the next 12 months.
Aussie CEO James Symond said that mortgage brokers play a crucial role in educating clients and assisting them through the home loan process.
“We know first home buyers often need more education and support so they can feel confident in selecting the right home loan,” Mr Symond added.
“Some first time buyers want to be educated steadily and taken through the mortgage process step by step, while others want to outsource as much as possible so it’s quick, easy and requires little of their time,” the CEO said.
“Saving customers money, time and hassle are key elements of Aussie’s proposition, and I believe this is why we’re seeing such strong growth in first home buyer activity.
“The slight cooling of some of our larger property markets, current record low interest rates, growing choice and complexity in home loans, and improved first home buyer grant schemes would all be factors.”
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