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Government incentives and innovative home loans from lenders such as NAB are giving first-time buyers more options for realising their home ownership dreams.
Last year’s property market downturn has created an opportunity for first home buyers to enter the market and lending solutions that offer more pathways to home ownership, along with government initiatives such as the First Home Guarantee are providing support.
Home values fell during 2022 while rising interest rates helped people saving for a deposit. This cut the time to save for a deposit for an entry-priced house by about six-months, while the time to save for an entry-priced unit reduced by about two months compared to the same time a year earlier, according to the 2023 Domain First-Home Buyer Report.
Home values have been rising again in 2023, but NAB Executive Broker Distribution, Adam Brown said first home buyers are eager to enter the property market and are overcoming obstacles to doing so – with mortgage brokers playing a key role in guiding them through the process.
“Younger Australians – like everyone – are facing rising living costs and serviceability challenges, but they’re not not letting those challenges hold them back from owning a home. They’re just finding new ways to achieve their dreams of property ownership – and mortgage brokers are well positioned to help them to understand their options,” Mr Brown said.
Societal shifts: Friends and family buy together
There has been a growing trend over recent months for young people to pool their resources to buy properties with friend, siblings and other family members.
The expansion of the First Home Guarantee (FHBG) from July this year is providing support to this trend.
The FHBG, part of the Australian Government’s Home Guarantee Scheme (HGS), is aimed at helping eligible home buyers to buy a home sooner. With 35,000 places available in the 2023-24 financial year, the HGS is available to eligible first-time buyers who borrow through a participating lender, such as NAB.
The scheme allows eligible buyers to purchase a home with as little as 5% deposit without paying Lenders Mortgage Insurance. The scheme will guarantee up to 15% of a property’s value, as assessed by the participating lender. It offers a guarantee rather than a cash payment or deposit for a home loan.
Under expanded criteria for the HGS for the 2023-24 financial year, friends, siblings and other family members are eligible for joint applications.
“People are meeting partners and getting married later in life so they are thinking outside of the box to find ways to make their first step into the market more affordable. Traditionally, home lending was mainly targeted at single buyers and married and defacto couples, but as lenders we’re increasingly recognising the diversity of relationships that people have, and this is helping more people get into the market,” Mr Brown said.
NAB’s research from earlier this year found that 40% of young Australians are considering buying a home with someone other than a romantic partner.
In the 18 to 29 year old age bracket, buying with a friend topped the list of compromises that people would make to get into the property market, the research found.
Rentvesting on the rise
The concept of “rentvesting” – buying in one location and renting in another – is also gaining popularity. NAB’s research showed that almost one third of would-be first home buyers were considering buying a property to initially rent out if it would help them get onto the property ladder.
“As a Big Four bank, NAB prioritises innovative ways to open the door to home ownership to more Australians. We’re proud to be a participating lender in the HGS – it’s just one of the ways we are playing our part in supporting more people to reach their goal of home ownership sooner,” Mr Brown said.
“As the bank behind the broker, we also know how important it is for buyers to feel supported with their home lending needs – particularly when they’re entering the market for the first time and brokers are key to providing that guidance,” he added.
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