Get saving, broker tells homebuyers

Demand for loans that allow homebuyers to borrow the full cost of the properties they’re purchasing has more than doubled since the First Home Owner Boost ended, according to mortgage broker Loan Market.

Loan Market chief operating officer Dean Rushton says that despite the boost being removed at the end of December, brokers are still seeing a huge number of enquiries from people looking to enter the property market.

"However, for these people, tighter lending restrictions which require genuine savings contributions of around five per cent towards the property purchase mean most are unlikely to get past first base," Rushton adds.

"The major lenders have no appetite for this type of lending and there's little room to move for applicants who don't fit the box."

Lenders have dropped their maximum loan-to-value ratios (LVR) to as low as 85 per cent since early last year, Rushton says, making it much more difficult for first-time buyers.

Would-be first homebuyers need to develop a savings plan early to build a home deposit, he says.

"Unfortunately, a lot of people have lost the knack of saving money, which makes it difficult if you want to find the finance to get into the residential property market at the moment.

"The situation is unlikely to change in the near future so if you're in the first homebuyer category then you should plan ahead and talk to a mortgage broker in advance to understand your position before you target your property price range."

Family equity options provide one alternative to help first homebuyers enter the property market, Rushton notes. These allow parents or other immediate family members to help with loan servicing and security support.

"The most popular of the family equity options is the limited liability guarantor and there has been an increase in enquiries for this since some of the major banks reduced their LVRs to 85 per cent," Rushton says.

"But all parties do need to be aware that in the case of a default, the family members are liable for the percentage they secure."