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Saving for a Deposit: Why First Home Buyers are Struggling

March 3, 2024
Read Time:
5 mins
Author:
Inovayt

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As inflation has taken a significant toll on our finances, the same is true about the property market. For first home buyers especially, breaking into the current market is considerably harder than it used to be. 

Not only have property prices risen, but saving for a deposit means saving almost double what buyers needed in the past. If you’re a first home buyer struggling to get your finances in order, keep reading for tips from our expert mortgage brokers. 

Housing affordability in FY23

Before we get into the saving tips, it’s important to understand what the market is doing and why it looks like this. Key statistics are in from the Pexa Buyer Deposits Report which finds that Aussies wanting to buy a home have to now work at least two years longer to save for a deposit than they did in 2020. 

This may not come as a surprise based on soaring house prices, rising interest rates and the tightening of lending criteria imposed by banks which is only putting housing even further out of reach for many. 

So, which Australian states have been impacted the most?:  

  • The time taken to save for a deposit in NSW has nearly doubled to almost 8 years today compared to just over 4 years in 2020 (up 83.2 per cent).
  • In Victoria, it now takes 5 and a half years to build up a deposit compared to just over 3 years in 2020 (up 64.2 per cent).
  • It now takes more than 5 years in Queensland compared to less than 4 years in early 2021 (up 36.9 per cent).

FY23 statistics 

In FY23, some significant statistics stood out. 

  • The total value of deposits amounted to $62.2 billion across the eastern states. This included $27.2 billion in NSW, $20 billion in Victoria and $15 billion in Queensland.
  • Lenders mortgage insurance (LMI) was used in more than half of purchases across all three states, down 3 per cent to 53.4 per cent in NSW, down 2.6 per cent to 56.5 per cent in Victoria and down 4.1 per cent to 54.1 per cent in Queensland.
  • Deposit-to-value ratios (DVRs) increased 1 per cent to 20.4 per cent in NSW, 0.8 per cent to 19.5 per cent in Victoria, and 1.5 per cent to 19.8 per cent in Queensland from FY22 to FY23.
  • Deposit-to-value ratios by property value were lowest in the sub-$500,000 price range band and increased as property value increased across all three states.
  • Loan-to-value ratios (LVRs) were higher among major lenders compared to the non-major lenders at 81.2 per cent vs 76.2 per cent in NSW, 81.9 per cent vs 77.5 per cent in Victoria and 81.9 per cent vs 77.6 per cent in Queensland.

Tips on saving for a deposit

If your head is currently in your hands, we’re here to help with some of our top tips on saving for a house deposit. 

Planning on saving for a deposit? Try our free deposit savings calculator. 

Analyse your current financial situation

Before you even consider saving for a deposit, it’s important to analyse your current financial situation with your Inovayt mortgage broker. They will work with you to gather a complete understanding of your spending patterns, savings and outgoing payments. From here, they can advise you on the steps you need to take to save for a deposit. 

Create a budget 

If you haven’t got a budget, creating one in conjunction with advice from your mortgage broker will significantly help you understand your finances better. It’s a big-picture view of every aspect of your finances and what you must do to save a big enough deposit.

Ready to refresh your budget? Try our free budget planner

Set up automatic transfers

One great way to save money is to set up automatic transfers, which leave your account as soon as your pay goes in. This way, you won’t have time to miss the money before it goes into a separate savings account! 

Consider investing 

If you’re comfortable with a bit of risk, investing can be a great way to increase your savings for a house deposit. Finding the right investment strategy can be tricky – especially if you’ve never invested. Diversifying your portfolio and having a plan in place if you’re considering investments is essential. 

Read our blog, Investing for Beginners, if you’re unsure where to start. 

Manage your debts

A mortgage is a significant financial expense, so clearing as much of your existing debt as possible before purchasing your property will help relieve considerable financial stress. More importantly, less debt will make you a more favourable borrower for a lender to lend to. 

Have you considered a debt consolidation loan? Try our free calculator

Consider government grants

Depending on your state or territory, you may be eligible for government grants, including stamp duty exemptions. You can find which government grants might be available to you here

Consider a guarantor home loan

If saving for a deposit feels a long way off, consider a guarantor home loan. Guarantor home loans are fantastic for those with parents or family willing to help first home buyers enter the property market. Having a guarantor means they will make your mortgage repayments on your behalf if you can’t make them yourself. 

To learn more about guarantor home loans, read our blog

Additional costs to factor in

When saving money for a deposit, it’s also important to factor in other significant expenses that come with purchasing a home. 

Lender’s mortgage insurance 

Lender’s mortgage insurance (LMI) is a one-off, non-refundable, non-transferrable premium added to your home loan. The amount you’ll need to pay depends on several factors, including the size of your deposit and how much you’re borrowing.

Learn more about LMI here

Stamp duty 

Stamp duty will be the most considerable expense you must budget for outside your mortgage. Stamp duty varies from state to state. You can check our stamp duty calculator for details on any concessions applicable to your stamp duty or speak with an Inovayt mortgage broker for further information.

Conveyancing fees 

Your conveyancer assists with the legal aspects of purchasing a property, including navigating the property transfer between the buyer and the seller from sale to settlement. 

Furniture and household goods 

Lastly, if you’re moving out of home for the first time, there’s a good chance you’ll need to furnish your place! Although this is part of the property-buying journey that many look forward to, furnishing a whole house adds up, so remember to leave some money in the budget. 

How can an Inovayt mortgage broker help get you into your first home? 

At Inovayt, our expert mortgage brokers are experienced with the fluctuating property market. We understand how difficult it can be for first home buyers to break into the market, but know how to work around it. 

If you’re a first home buyer looking to break into the market, get in touch with one of our team today. 

Struggling to save for a deposit? Let us help.

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