Size Of Loans Crucial

With such mass movements of the first home owners moving onto the world of mortgages and purchasing new and second hand property there are many saying more caution is needed.

The government’s stimulus package for first homeowners has worked a treat if short term stabilization of the property market was intended. The extra $7,000($14,000 total) for second hand, and extra $14,000($21,000 total) has put in place some support for the slowing market and helped the $250k-$500k market hold from further price falls.

What is more concerning is the amount of debt Australians are taking on the get into their newly purchased homes. Personal borrowing levels have significantly risen in the last two years even in a recession!

First homebuyer average loan amounts rose approx $52,000 to $280,600 in the two years to February from the Australian Bureau of Statistics figures.

With unemployment tipped to rise and consumer spending slowing to put the brakes on the economy, many homebuyers would be urged to think about job security and worst-case scenarios before getting big loans for property. The flip side is their borrowing to value could decrease faster than usual with them buying in a discounted market with a probable upturn in the next few years.

The other and probably most crucial point would be interest rates. Many are only being able to enter the market with the low rates providing them with the ability to service their loans.

History says they will go up and those who don’t look at fixing rates could be caught out big time with the possibility of hyper inflation and higher rates very possible!

More thought needed all round….