Lack of savings rather than rising interest rates and house prices is the major reason Generation Y’ers are unable to enter the property market, according to a national survey.
The latest Loan Market Group survey found 68 per cent of Generation Y potential home buyers did not have enough genuine savings to buy a property.
Of 134 broker respondents, 13 per cent said their first home buyer clients blamed property prices for deterring them from home ownership, while 5 per cent believed interest rate increases were influential.
Loan Market chief operating officer Dean Rushton said the survey findings highlighted the issue of lenders requiring genuine savings – normally five per cent of the purchase price – for a home loan.
Mr Rushton said Loan Market was campaigning for banks to place a higher consideration on rental payments in the context of assessing genuine savings in a bid to arrest the steep decline in first home buyers.
“Enquiries from first time buyers are down more than 40 per cent from a year ago and foremost among the factors restricting potential property purchasers is the difficulty in saving a deposit for a home loan,” he said.
“It is very hard for young people to continue to pay the steep rents customary these days and save money for a mortgage.”
Mr Rushton said another issue with Gen Ys is they often fall into the category of needing to borrow more than 80 per cent of the property price.
“For loans above this 80 per cent LVR threshold, LMI is required, necessitating strict lending practices which also place secure employment history as a prerequisite.
“Where a deposit of less than 20 per cent is available, most lenders require their applicants to have been employed for at least 12 months with their current employer or have been continuously employed in the same industry for at least 24 months.”