First homebuyer interest spikes as interest rate cut looms
THE number of first home buyers looking to jump into the housing market has spiked in anticipation of an interest-rate cut next week.
There has been a 55 per cent rise in visitors to first homebuyer guides this month — the biggest increase in a year — according to comparison site, Finder.
In just the past week, seven lenders lowered their rates on owner-occupier fixed and variable home loan products as demand for mortgages increases, with the lowest variable rate on the market currently 3.29 per cent.
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An increasing number of economists are expecting an interest-rate cut of 0.25 per cent when the Reserve Bank of Australia meets next Tuesday — the first change to the cash rate in almost three years.
Finder insights manager Graham Cooke said it was a strong indication first home buyers were finally seeing an opportunity to break into the market.
“There’s a perfect storm brewing for first home buyers,” Mr Cooke said.
“Property prices are dipping, lenders are dropping their rates and a first homebuyer’s scheme is on the cards.
“After 31 months of no change, all signs are pointing to a cash rate cut next Tuesday. The expected move is causing a flurry of rate drops among lenders, especially on the fixed home loan front.”
But Mr Cooke said potential buyers should be careful about taking advantage of the Coalition’s proposed First Home Loan Deposit Scheme.
“A lower deposit will add more cost to your loan in the long term, and the increased risk to the bank may mean a higher interest rate,” he said.
“However, the potential savings from this scheme could be significant.”
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Under the scheme, first home buyers in Brisbane could be getting on the property ladder with a deposit of just $27,500 for a $550,000 house.
Marcel Thieliant of Capital Economics expects the RBA to cut interest rates to 1.25 per cent in June, followed by another 25 basis point cut in August.
“We expect the RBA to cut rates to 0.75 per cent by year end,” he said.
CommSec is also pricing in a rate cut in June and the possibility of another in August, as is RBC Capital Markets.
Independent property analyst Michael Matusik is tipping two 0.25 per cent rate cuts in the second half of this year — one in July or August and the second drop in November.
“And I wouldn’t be surprised if the cash rate fell to 0.75 per cent sometime in the first half of 2020,” Mr Matusik said.
AMP Capital chief economist Shane Oliver said it was possible the RBA would cut rates in June, but could wait a bit longer.
Mr Oliver said the federal government’s First Home Buyer Deposit Scheme, the end of threats to negative gearing and capital gains tax, APRA’s move to lower hurdles to getting first-home loans and the likelihood of the official interest rate being cut were gamechanging for the housing market.
“These developments taken together are big,” Mr Oliver said.
“They suggest that property prices will bottom earlier than otherwise and we can see that later this year.”