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As you may know, at Mortgage Coach our coachess get an extra special kick out of helping First Home Buyers (FHB) get into their own homes. So we are always looking for ways to assist them with their goals and smooth the way forward with their home ownership dreams.

So this week, I’m sharing some cool insights from a fascinating and enlightening new research paper by the Reserve Bank of Australia (RBA). * Apparently the RBA have been looking at changes in activity and purchasing success within the First Home Buyer (FHB) sector in Australia over the last 10 to 15 years. Some of the interesting stats they discovered include:

  • There was a downward trend across the sector with less FHB actually transitioning to home ownership in the years from 2008 to 2014 forward, as compared with during the previous years from 2001 to 2007
  • The biggest fall in numbers within the FHB sector, amongst those who became home owners, was within the 25 to 34 year old age group. This group fell from just under 12% of all FHB to just under 9%, with them delaying purchasing and therefore effectively becoming part of generation rent.
  • This delay in entering the housing market seems to be strongly related to increasing house prices within many of the capital cities across Australia, which has been making it more difficult to save for a deposit.

However, the points which stood out most clearly to me from this report were:

  • Even though FHB numbers may have fallen during this time, it was noted that those who successfully made the transition to home ownership were likely to be more capable with handling their loan responsibilities. They were also more likely to pay down their loans sooner and reduce their debt more quickly over time.
  • However, the FBH across all age groups, who had received financial assistance from their family and/or friends to create their home deposit, were much more likely to experience financial distress and hardship over the lifespan of their loan. They were also more likely to have to later rely upon family and friends to assist them with their mortgages and financial affairs.

Now, from these very salient insights into the current FHB market, I think there are a few important take home points on the benefits of developing the saving habit for FHB.

  1. Learning How to Save is the Key: At any stage in life, possessing the discipline of saving is a powerful habit to develop. However, when it comes to FHB it is an absolutely essential skill to possess. Not only does it demonstrate that you can live within your means and spend less than you earn, it also shows that you have the ability to manage your money and your financial affairs over time.
  2. Savings Builds Financial Resilience: Once you have mastered the skill of saving on a small income, this can later be applied to larger amounts as your income and expenditures grow. It also means that you will be more likely to be able to handle your affairs if you ever experience financial challenges because you have a proven track record that you can be responsible with your money.
  3. Demonstrating that you Have Genuine Savings: Perhaps most importantly for FHB, by having a solid savings history and a healthy self-generated deposit for your home, your lender will see that you are a good candidate for a mortgage. Because, as these stats show, if you can save first and manage your money well to create a home deposit, you are more likely to be able to do so into the future. In this way everyone wins as FHB are better money managers, more financially resilient and more likely to pay off the home loans, whilst the banks and other lenders gain clients who are deemed to be lower risk and good financial managers.

So if you are looking for ways to improve your saving habits in regards to your home deposit or have some questions on how you can get on the fast track to home ownership, feel free to contact us at Mortgage Coach.

Until next time, wishing you happy saving,
Harry

* Source report from the RBA

 https://www.rba.gov.au/publications/rdp/2017/pdf/rdp2017-05.pdf

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