Mortgage Choice broker Terri Unwin says first-home buyers fearful

First-home buyers in Sydney are choosing to wait-out interest rate hikes before taking a leap into the housing market.

Mortgage Choice broker Terri Unwin said first-home buyers were laying low while interest rate rises continued to create uncertainty in the housing market.

Borrowers have been slapped with a record seven interest rate rises from the Reserve Bank of Australia this year.

“I think a lot of first-home buyers have just backed right off and decided that it’s just too scary with rates going up every single month since May,” Ms Unwin said.

“I think a lot of them are just sitting back and thinking we’ll just put it off for six months and see what happens”.

Both federal and state level first-home buyer assistance schemes appear to be failing to get more first-time buyers into the markets.

The First Home Buyer Assistance Scheme allows first-home buyers in NSW to purchase a home for up to $650,000 without paying any stamp duty.

“The uptake isn’t great because people aren’t buying,” Ms Unwin said.

“The stamp duty waiver is not really helping anyone because there’s very few people who are buying for less than $650,000.”

For properties between $650,000 to $800,000, the waiver is applied as a discount on the stamp duty price.

“By the time you get up to $750,000, you’re probably only on a $2000 discount of a $30,000 stamp duty,” Ms Unwin said.

“You’re jumping into the stamp duty cost pretty quickly.”

There are also 35,000 places available for buyers to take up the national First Home Buyer Guarantee scheme that was introduced on July 1.

The guarantee allows buyers to purchase a home with as little as a 5 per cent deposit without paying Lenders Mortgage Insurance.

Eligibility for the scheme is capped for individuals earning $125,000 a year and for couples earning a combined $200,000 a year.

In NSW, the guarantee is only eligible for properties priced at $900,000 or less.

“This scheme has been in place since July 1 and we’re not seeing the huge take-up of applications that we saw in the first or second rounds,” Ms Unwin said.

She said it was forcing many first-home buyers to search further away from Sydney to get into the housing market.

“We’re seeing that it’s benefiting those that are prepared to move right out west,” Ms Unwin said.

“I’ve got a couple that are actively looking and they are capped at a borrowing capacity of $650,000.

“They want a house so they’re looking out at Doonside.”

The average first-home buyer budget is $749,000, according to Finder’s First Home Buyers report.

Close to one in three first-home buyers have a budget below $500,000, with an additional third budgeting between $500,000 and $750,000.

On January 16, a new alternative to stamp-duty comes into play, with buyers of newly purchased homes eligible to instead opt in for an annual land tax.

The legislation forms part of NSW Premier Dominic Perrottet’s signature property reform and was passed earlier this month.

“One of the restrictions I’m finding there is it’s very hard to guide customers on which way to go because it’s not an easy calculation,” Ms Unwin said.

One of the biggest issues she sees moving forward is the challenge of factoring in an annual land tax into an individual’s future expenses when applying for pre-approval.

“If someone is pushing to their maximum borrowing capacity but then you have to factor in an ongoing land tax, that could push them over because it becomes an outstanding liability that they have to cover every year,” Ms Unwin said.

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