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Loan process ‘shrouded in mystery’ for FHBs: research

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Malavika Santhebennur 5 minute read

First home buyers would like more assistance with choosing and applying for a home loan, according to a major brokerage.

New research by Mortgage Choice has revealed that almost three quarters – or 71 per cent – of first home buyers (FHB) want more support when making decisions around financing a property purchase.

Furthermore, 49 per cent of FHBs said that choosing and applying for a home loan is the number one area of the home purchasing process where they require support from others.

Among those FHBs who would require more support, 39 per cent would like someone to guide them through the loan process, while 26 per cent need someone to develop their knowledge and confidence.


The data – which is based on an online survey conducted by global market research consultancy, CoreData on behalf of Mortgage Choice of 1,023 respondents aged between 21 and 60 who are either FHBs or a homeowner/investor – showed that 32 per cent of FHBs have “minimal confidence” about understanding home loan features best suited to their needs, while 57 per cent reported feeling “highly” or “reasonably” confident.

Meanwhile, 11 per cent of the respondents reported having no confidence at all in their ability to distinguish which home loan is right for them.

Mortgage Choice listed the top five challenges FHBs identified in securing a home loan, which include:

  • Understanding how the whole process works (47 per cent);
  • Ensuring that they are securing the best possible deal (46 per cent);
  • Ensuring that they qualify for the loan amount and property that they want to buy (45 per cent);
  • Establishing what they can afford to comfortably pay back (41 per cent); and
  • Understanding what (if any) government support they qualify for (37 per cent).

Almost half rely on brokers

When it comes to seeking support, half of all FHBs said they rely on family, friends, and work colleagues, while 46 per cent seek advice from mortgage brokers and 36 per cent rely on online information.


Commenting on the findings, Mortgage Choice CEO Susan Mitchell said that the research has confirmed that securing a home loan is a process that is "shrouded in mystery" for many FHBs.

She added that while historically low interest rates could benefit FHBs, the research has pointed to the significant barriers this cohort faces in understanding how the buying process works.

“Mortgage brokers are home loan experts and not just in regards to the home buying and home loan process,” Ms Mitchell said.

“Brokers understand the uncertainties first home buyers face, and they are able to break down the process into simple steps, free from jargon that can be so confusing for home buyers.”

“Taking out a home loan is a major financial commitment, and first home buyers, quite rightly, want to be sure they have the loan in place that is right for their needs. Brokers understand this, and will provide straightforward explanations about why they are recommending a particular loan or lender.

“This is incredibly empowering for first home owners, who can make an informed choice regarding the home loan that best matches their circumstances.”

Ms Mitchell said FHBs can experience “information overload” when researching online, or can receive conflicting information from family and friends, which can leave them overwhelmed and with little clarity.

“Knowledge really is power when it comes to buying a first home and an experienced mortgage broker will be the home loan expert on your side right through the process,” she said.

“Not only are mortgage brokers consistently up-to-date with ever-changing lender requirements, they also act as a mentor for first home buyers, explaining the home loan process, taking the time to answer questions, and coaching first home buyers through the steps they need to take to become home loan ready.”

The findings have come at the same time as new figures released by Mortgage Choice, which has revealed that apathy towards home loan interest rates by borrowers has increased progressively over the years, with only 46.5 per cent of borrowers aware of their current interest rate in 2020.

[Related: More Aussies ‘in tears’ during house hunting]

Loan process ‘shrouded in mystery’ for FHBs: research
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Malavika Santhebennur

Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.


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