First home buyers (FHBs) are being warned by an Australia's financial comparison website to take caution when signing up for a home loan, following research showing many are taking on more debt despite the relative stagnation of the housing market.
The warning follows research by RateCity, which found first home buyers are taking on more expensive mortgages on the back of steady growth in house prices over much of the past 15 years.
According to the site, the national average first home buyer mortgage size almost doubled in the past decade, to $297,100 in January 2013 and FHBs are taking on almost three-times more debt than they were 15 years ago.
If the average first home buyer loan size kept in line with inflation only over the past 15 years, RateCity estimates first time borrowers are taking on a further $133,869 (or 82%) above the inflation adjusted average loan size.
Across the country, Tasmanian FHBs have seen the biggest jump in average home loan size since January, 2003, by a massive 154%.
Looking back 15 years, however, ACT first home buyers had the biggest growth of average home loan size at 226%. While NSW has one of the biggest average first home buyer loan sizes, its growth was the slowest.
Michelle Hutchison, spokesperson for RateCity, says that while there are good opportunities to enter the home loan market this year, FHBs need to be cautious about taking on too much debt.
"Australia's property market is looking positive for first home buyers with record low interest rates making home ownership more affordable and luring some buyers out of the woodwork. While prospective home buyers are starting to enter the property market, borrowers need to be careful about how much debt they can afford to take on.”