Home owners and buyers are once again feeling the pinch to keep their dreams of home ownership alive as housing affordability returns to the property market agenda. But, First National Real Estate Bribie Island Principal, Lyn Petrohilos says it’s a matter of rethinking options and developing creative strategies.
Impending future rate rises, along with tightening lending conditions and increasing mortgage stress concerns have started to take their toll on home buyers’ ability to own their own home. According to Lyn, home buyers need to take action on an individual level to tear down the wall of housing affordability in any way they can.
Recent research has found a decline in the number of home loans with a high loan-to-value ratio (LVR) of 95 per cent or above. LVR refers to the amount of money borrowed for a property, compared to what the property is worth.
Lyn says while lending criteria has toughened in recent months, there are still lenders willing to negotiate a better deal around a number of factors such as fees or rates or the actual LVR itself.
“Lending institutions need to be willing to negotiate and be a little more flexible,” Lyn said. “And there are plenty of lenders out there who are willing to do just that, if home buyers are willing to shop around a little and do a bit of homework themselves. It’s up to the individual to take matters into their own hands and ask.
“But they need to have the facts that support their case as well.”
Some key tips for overcoming housing affordability concerns include:
- Time your purchase for when there is a lull in the market, such as Winter, when the market generally slows and lower demand can potentially tip the balance in favour of buyers.
- Calculate what you can afford to spend, factoring in any interest rate increases, probably 2 per cent higher than current levels. Match this to your list of preferred suburbs and concentrate on properties that are genuinely within your range.
- Be flexible and adjust expectations as required. You may dream of buying a home in a particular area, but consider a smaller home, or even a unit or apartment, with a view to upgrading later. Alternatively, consider an area a suburb or two removed from your where you would like to live.
- Start a disciplined saving strategy immediately. Set realistic savings goals and set up an achievable budget for household expenditure.
Lyn also had some sage advice for home owners currently experiencing mortgage stress.
“Home owners can consider extending the life of the mortgage,” Lyn said.
“In recent years, all the focus has been on how quickly a family can pay back the mortgage and then move another rung up the ladder.
“Obviously, that is the most desirable situation, but times are changing and it may be more useful to focus instead on how to get into the market in a way that is financially manageable.
“But whatever they do, they should seek the services of a qualified, reputable and trustworthy financial advisor.”