Rising unemployment and expected interest rate hikes are unlikely to result in large scale defaults, according to a report by mortgage insurer QBE LMI.
The report, released today, stated that lower LVRs mean first home buyers are "more likely to borrow within their means".
"Moreover, with the [first home owners grants] likely to form the entire 5% of the purchase price, or in some cases the total 10% deposit, there is also a requirement by many lenders and lenders' mortgage insurers for purchasers to demonstrate genuine savings of 5% of purchase price to ensure that some of their own money is also at risk in the purchase."
The report also found that the average loan to first home buyers has increased from $264,500 in October 2008 to $280,600 in February 2009.
According to authors of the report, should the government extend the grant beyond 30 June, then first home buyer demand could peak at 180,000 loans in 2009. However, if the FHOGBS expires, demand for new and established dwellings will be pulled forward, with short term rises in property prices of 5% forecast.
"With rising rents and lower interest rates, the motivation for renters and first home buyers to get into the housing market has never been more compelling. This is reflected in the rebound of First Home Buyer's share of new loans up 25.7% in December quarter 2008 compared to December quarter 2007, and activity remaining strong in January (+19.6%) and February (+35.8%) 2009."
Related stories:
AFG expecting big drop in first home buyers
Victorian budget gives help to first home buyers