The Federal Government in their recent Budget announced a six month extension to the First Home Owners Grant (FHOG) boost. The boost, which gives first home buyers an extra $7,000 when purchasing an established home and an extra $14,000 for new homes, was due to end on June 30.
The full boost will continue until 30 September, when it will then be halved until 31 December. After that date the $7,000 first home owner’s scheme continues in its original form.
The extension was met with some surprise, after Kevin Rudd sparked a flurry of interest by earlier hinting the boost would not be extended beyond its original June 30 deadline.
Many first home buyers are taking advantage of this boosted grant. To share some statistics with you, there were 8,818 first home buyers in August 2008, and in March 2009 there were 17,652.
With the Government assistance on offer and record low interest rates, it’s understandable why so many are taking advantage of this opportunity to enter the property market for the first time. Using Housing Industry Association figures, the overall market is at its most affordable for seven years. HIA chief executive Chris Lamont declared that “there has never been a better time to enter home ownership”.
Whilst all this is well and good, the banks have recently tightened their lending policies which have created some new hurdles for prospective first home buyers. Generally speaking, banks now seek a 10% deposit, of which 5% must be from genuine personal savings. There are some exceptions to this though. These recent changes have made getting finance approval much more complex. So the best advice I can give you is to discuss your individual circumstances with a mortgage broker.
For those borrowers who happen to meet the bank’s eligibility criteria, you will be faced with application delays ranging from one week to four weeks. This is because there are fewer lenders in the marketplace than previously. The major banks have a stranglehold over the mortgage market. The latest statistics report the big four banks doing 72.2% of all residential lending. This is up from 57.5% just one year earlier.
Progressing further, the next dilemma borrowers are confronted with is should they take advantage of the low variable interest rates on offer, or choose a higher fixed interest rate for up to the next five years? Indicatively, a five year fixed rate is approximately 1.5%pa higher than what you could get on a variable rate. Initially you’ll be paying more, but will it pay off over future years ??? I’ve got some recent news articles on this subject that I’m more than happy to email to you. Just contact me via phone or email.
I would also like the opportunity to answer any FHOG or finance related queries you may have via this blog, or alternatively you can contact me separately via email at jthomson@smartline.com.au or phone 0740410055. Our website is www.smartline.com.au/cairns
