Higher interest rates and tighter lending practices are stopping first home buyers from stepping onto the property ladder.
According to new research by Loan Market group, enquiries from first home buyers to the brokerage fell 15 per cent in the last six months of 2010.
Loan Market chief operating officer Dean Rushton said monthly enquiries from first home buyers had dropped to 30 per cent of all enquiries received in December 2009, compared to 45 per cent in June last year.
“If this trend continues first time buyers are at risk of becoming a secondary market,” Mr Rushton said.
“This is a far cry from 2009 when first time buyers dominated the home finance market due to boosted government incentives and interest rates at near 50 year lows.
“But a combination of factors such as four interest rate rises last year by the Reserve Bank of Australia and the prospect of more this year is squeezing these people out of the market.” Mr Rushton said the federal government’s $1.2 billion First Home Saver Accounts (FHSA) scheme had done little to encourage more first time buyers into the market.
“Our own surveys have found most people have hardly heard of the scheme, which was launched more than two years ago,” he said.
“The scheme aimed to assist more than 700,000 people within the first four years but it has attracted nowhere near the amount of interest anticipated.
“Despite the 2010 budget announcement by the federal government of draft laws to boost the flexibility of the scheme, prospective homebuyers are still unaware of the FHSA or find it too complicated.”
Under the FHSA, the government contributes 17 per cent on the first $5000 of individual contributions made each year. Account holders are required to keep savings in the FHSA for four financial years before they can use the funds to buy a home.