Borrowers are paying less on their loan repayment across more than half of all suburbs compared with if they rented in the same suburb, an industry report has revealed.
A report from CoreLogic, commissioned by Aussie, shows that in almost 60 per cent of suburbs around the nation, it could cost less to pay down a home loan each month than to pay rent.
The report found that when buying a house under a three-year fixed rate scenario, over half – or 52.2 per cent – of Australian suburbs were cheaper to pay down a mortgage than pay rent on a house, which is up from 39.9 per cent last year.
According to the report, this growing trend of home loan borrowers paying less in their mortgage repayments than rent has been attributed to record-low mortgage rates, combined with a slightly weaker property market.
“This is great news for first home buyers, who may not realise that buying a property could reduce their housing costs in the long term. And we’re talking savings that have an impact,” Aussie CEO James Symond said.
Record-low interest rates are the key
The report found that the RBA reducing already low rates a further three times this year has made buying more affordable than ever.
“Rates were already low at the start of 2020, but they tumbled in March following back-to-back cuts by the Reserve Bank.
“Today, we’re seeing home loan rates that start with a ‘2’ – the lowest since records began in 1959,” Mr Symond said.
The mortgage brokers pointed out that RBA governor Philip Lowe has previously stated that rates will remain lower for longer, signalling the next rate rise is three years away.
“That’s giving home buyers some certainty that interest rates will remain low for an extended period of time,” Mr Symond told investors.
A big opportunity for first home buyers
The mortgage broker believes now is a good opportunity for first home buyers to get into the market.
“Our report shows there’s a big choice of suburbs where owning a home could be a lot kinder on your budget than renting,” Mr Symond said.
He advised first home buyers looking to enter the market to keep an eye out for government perks they could be eligible for.
“And along with low rates, first home buyers could also be eligible for financial support to get started – from state-based grants and stamp duty savings through to the $25,000 HomeBuilder grant.
“In more good news, October saw an extra 10,000 places opened up for the First Home Loan Deposit Scheme, which makes it possible to buy with a 5 per cent deposit and no lender’s mortgage insurance,” Mr Symond concluded.
Here are a few places where buying could be cheaper than renting, according to CoreLogic research: