First Home Buyers are getting older – and younger – all at once. The profile of the average first home buyer has seen significant change since the 1980’s. Thanks to government home buying support schemes there are more first home buyers than every trying to get their very own home. The average age of a first home buyer in Australia now sits around 36, whereas in the 1990’s buyers were in their late 20’s.
In the mix of this older generation is a good proportion of younger twenty-somethings who have saved aggressively, living at home, and determined to make their move into owning their first home.
"All these young ones now, like in their early 20s, they've got their stuff together. It's quite interesting that they're turning up with $100,000 they've been saving for a couple of years," Janine Ashmore, Darwin based broker told Australian Broker. "They've got all this money they've saved because they've been living at home."
Ashmore said the trend has emerged over the past two to three years, following the pandemic.
"People are more aware of their finances. I think that's the thing," she said. "And they've just started saving earlier. They couldn't go out shopping and spending as much as they did [during the pandemic]. And I think they've just learned to save as well. Or their parents didn't do quite so well, so they don't want to be in that position, so they've started earlier."
Contributing to the rise in slightly older shoppers are increasing living costs, skyrocketing property prices, a chronic housing shortage and mounting student debt, all of which are making it harder than ever to save for a deposit and pushing the dream of homeownership further into the future for many Australians.
Complicating matters are stricter lending criteria and limited housing supply in desirable areas. As a result, more buyers are entering the market in their mid-30s or later, a noticeable shift from previous generations. This trend is likely to continue northward unless the cost of living crisis eases.
Rising to the challenge
It’s not just finding a property that first home buyers have to worry about - both groups of homeowners have some challenges to overcome. Mortgage Brokers are well positioned to help first home buyers understand the challenges and how to get ‘match-fit’ to succeed in their finance application.
While both groups have limited to no equity from previous properties, younger shoppers have limited credit histories and likely less earnings. In addition, many rely on parents – the ‘bank of Mum and Dad’ - or other family members for financial support. Guarantor mortgage loans are structured so that a parent or relative pledges part of their own home’s equity (typically enough to cover the 20% deposit) as a security, while the borrower remains solely responsible for repaying the loan. For many, it’s the only way to break into the housing market without waiting years to save.
Meanwhile, older shoppers might have a hard time convincing a bank to give them a loan. Home buyers entering into the market with less than 30 years before retirement, and the end of their proposed loan term, will need to have a good exit strategy. Understanding how your superannuation will support you in retirement with living expenses and any residual debts, together with a reasonable downsizing option are important aspects of an exit strategy to give a lender confidence that you can meet your ongoing loan commitments. It’s not difficult to put together a suitable exit strategy, and people aren’t suddenly taking shorter loan terms, but it’s important to have a plan in place.
Brokers are ready to deliver tailored solutions, break down deposit assistance options and spotlight creative paths to ownership.
