Housing Market Downturn Helping First-Time Home Buyers
-
Loading... - Bella Ferdinand
- 29 Aug 2024
- 58 Views
- 0 Like
- 0 Comment
The downturn in the housing market is offering a silver lining for first-time home buyers, as falling house prices are making it more affordable to get onto the property ladder. In July, first home buyers paid an estimated average purchase price of $655,000, which is $21,000 less than in July last year. The average price paid has dropped by $53,000 since its peak of $718,000 in April 2022, allowing buyers to borrow less overall.
According to Reserve Bank data, the average mortgage size approved for first home buyers in July was $548,000, down from the peak of $595,000 in May 2022. This indicates that, on average, new homeowners are carrying about $47,000 less debt than two years ago.
However, for some first home buyers, the debt remains costly due to the prevalence of low equity loans—where the deposit is less than 20%. In July, 35% of the mortgages approved for first-time buyers were low equity loans, up from 25% in July 2022 and 31% in July 2023. These loans come with higher interest rates, resulting in significantly steeper mortgage payments, especially with rates only recently beginning to ease from their highs.
The number of mortgages approved for first-time buyers has remained steady, with 2,583 approved in July, a figure that has consistently hovered around 2,500 per month over the past five months, similar to mid-2022 levels. This suggests that first home buyer participation in the market has remained stable.
As house prices continue to soften and mortgage rates are expected to decrease further over the next year, there may be an increase in the number of first home buyers entering the market, particularly as summer approaches.
