Finding alternative pathways to homeownership

Aussie-Lendi data: Brokers help first-home buyers defy the odds

Finding alternative pathways to homeownership


By Ryan Johnson

While 2023 presented challenges in the housing market, a significant portion of young Australians defied the odds and secured their piece of the property pie.

New data from Aussie and Lendi reveals that 32% of all new property purchases in 2023 involved first-home buyers (FHBs) who utilised the assistance of brokers.

This is a notable increase compared to the national FHB new purchase rate of 22%, according to ABS data.

“In the face of rising interest rates and cost of living pressures we’ve seen purchasers, especially first home buyer’s turning to brokers for assistance to understand the different ways they can enter the market,” said Sebastian Watkins (pictured above left), Lendi Group co-founder and COO.

“On the back of this professional advice, Lendi and Aussie brokers have helped FHBs beat the odds, with this cohort outperforming the first home buyer market by 10%.”

Guarantor loans on the rise

Following the Queensland government's decision to double its First Home Buyer grants to $30,000, Lendi Group observed a surge in Queensland, where FHBs accounted for 45% of all new purchases in the first month of the year – exceeding the national FHB new purchase market share.

The report also highlights a significant return to the "bank of mum and dad" with guarantor loans more than doubling in 2023 compared to the previous year, rising from 1.8% to 5%.

It's worth noting that only a limited number of lenders, including just three of the big four banks, currently offer this option.

“Those purchasers who were able to leverage the equity provided by guarantors, often from parents or guardians via guarantor loans, were able to enter the market with a deposit, on average, of $38,000,” Watkins said.

“For the remainder of FHBs, they had to fork out over double that, with an average deposit of $103,000.”

In addition, a FHB without a guarantor loan had an average property purchase price of $621,000.

This compared to a FHB with a guarantor loan, with an average property purchase price of $763,000. The current average interest rate with a guarantor is 6.14% versus without a guarantor 6.28%.

First-home buyer trends: alternative pathways on the rise

Kim Horan (pictured above right), a broker from Aussie St Mary's in Sydney's Western Suburbs, a region boasting the highest concentration of FHBs in Australia for 2023, observed this trend: "We've seen a rise in new buyers seeking alternative pathways to homeownership.

“Guarantor loans are a fantastic way for parents to support their children without requiring a cash deposit contribution."

Horan said it’s a more readily available option for most parents and is based on them having available equity plus confidence that their kids are ready for the commitment and have an ability to pay the loan.

“Of course, it’s vital that they have that trust, and I would encourage anyone thinking of going guarantor for a loan to have a frank and honest discussion about the applicant’s ability to meet the loan requirements under a variety of circumstances before committing to being guarantor.”

Savvy FHBs are also looking long term with 20% “rentvesting” – purchasing property for the sole purpose of renting it out.

Horan said this because a lot of young purchasers are looking to get into the property market early whilst maintaining their current lifestyle.

“So, it is no surprise that there has been an increase in FHBs choosing to buy homes in areas they can afford and renting them out while they either stay at home with parents or rent in areas that suit their current lifestyle.”

Beyond traditional first home buyer purchases

The data also revealed a shift from traditional single or dual occupancy purchases. In 2023, 5% of FHBs opted for loans with three or more applicants, compared to just 2% the previous year.

“Whilst it is still a small percentage of the total market capture, it is interesting to see more purchasers venturing out and seeking loans with three or more applicants to lessen the load on the individual,” said Watkins.

“It is not common knowledge that you can have up to four people on a home loan meaning that buying with friends and family is absolutely an option for consideration and something that our brokers can help with.”

And it’s not just the bank of mum and dad that FHBs have been tapping into, with many taking advantage of the federal government’s First Home Owners Grant scheme in 2023.

“The popularity of the scheme shows it is still an important tool in giving brand new purchasers a helping hand in entering the market and our brokers can help facilitate accessing the grant to make the process easier,” Watkins said.

Over the last 12 months, over 70% of the lending market was managed by brokers, highlighting the continued value of professional advice when making these important decisions.

“Our message to those considering entering the property market for the first time is to reach out to a broker and ask about your options,” said Watkins.

“There are multiple options a broker can help you work towards, including incentives which you didn’t know were available and a mortgage broker is best placed to support you through this process.”

What do you think of Lendi’s report? Comment below.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!