Fresh cries for further interest rate cuts amid first home buyer retreat

by AB13 Nov 2013

Further reductions in official interest rates by the RBA may be needed in order to awaken the sleeping first home buyer market, according to mortgage broker network 1300HomeLoan.

The company’s statement follows the latest ABS data showing the proportion of first home buyer loans out of all loans financed is in its biggest slump in history. September saw just 12.48% of all loans financed were by first home buyers - the lowest level recorded since records began in 1991.

The original number of first home buyer loans is also among the lowest levels, with just 6,364 settled in September.

1300HOmeLoan managing director, John Kolenda, says first home buyers have continued their retreat from the market despite the RBA's cash rate being at a record low of 2.5%.

He believes the RBA lowering the cash rate by two percentage points over the past two years boosted optimism in the domestic economy.

"The latest ABS housing finance figures for September showed a 4.4% rise on the previous month, which reflects the positive impact of the RBA's rate cuts," he says.

"But according to the ABS, the number of first home buyer commitments for September fell to 12.5% from 13.7% in August…The lower interest rate regime has brought investors back into the market, but first home buyers are continuing to stay away, perhaps waiting for more cuts from the RBA.”

Kolenda says first home buyers have also been ‘put off’ by some commentators and media spokespeople ‘talking up’ property prices, particularly in Sydney.

However, he believes it’s still a highly competitive mortgage market and that home loan customers should shop around for the best deal, rather than wait for the RBA to cut rates again.

"There is a great benefit in checking your home loan on a regular basis and comparing it to what else is on offer. If you just set and forget it can cost home owners tens of thousands of dollars in the long term."

On the other hand, the proportion of refinanced home loans is among the highest levels ever seen, reaching 33.8% in September.


  • by Lindsay Horlor 13/11/2013 9:21:09 AM

    How are First Home Owners tracked for statistical purposes? Only by grant applications. In NSW this means any FHO purchasing an existing property is not counted, thus this constant noise about FHO buyer numbers being low is very misleading. Time for all concerned to stop using this very inaccurate statistic.

  • by Shane 13/11/2013 9:42:06 AM

    FHO have disappeared due to the changes in FHOGS by governments. The cost of building a new home is much more than purchasing an existing home and existing homes no longer qualify for the FHOG. It will be very interesting to see what happens in Tasmania over the next few months.