deposit size now crucial & equally challenging

It did not matter if no deposit was saved at the peak of the boom, for the rising house prices removed the lender's risk exposure with seemingly 100% certainty.

That was a thing of the past and now, to remove that exposure to a very suspicious housing market, banks are justifiably wanting a much larger deposit from borrowers that were not so long ago chased for the biggest mortgage deals ever.

As a result of the market getting away from real fundamental values, the banks have shifted from an aggressive to a very conservative angle. So we have very high house prices in terms of wages and rental incomes, and we have very little savings from many first home buyers that were recently given literally any amount they wished for.

I find the statement about how long it takes for one to save an appropriate deposit on 70k wage surprising. However, the cost of real world living has disproportionately shifted away from us. The artificial market of late was nothing but a mirage that won many hearts and believers. Time to grow up mums and dads, and face the reality that house prices are where they're at due to banks loading up on our debt, hence their massive profits that's raking in the economy's earnings every single second we breathe. Their suspect income they're generating from their past actions will be their buffer as house prices expel the built up hot air.

Do they care the economy retracts? As long as their loans are serviced first and foremost before anything else, then the answer is no.



Taken from:

http://www.skynews.com.au/finance/article.aspx?id=776654

Falling house prices and lower interest rates have not made life easier for would-be home buyers saving for a mortgage.

According to a study by financial comparison website RateCity, home ownership remains a distant reality for many Australians.

It found that it would take a single income earner on $70,000 a year five years and seven months to save for a 10 per cent mortgage on a maximum recommended mortgage of $276,000.

Deposits are made on the property value not the mortgage size.

To avoid paying lenders mortgage insurance, which is charged to home buyers who borrow more than 80 per cent, a 20 per cent deposit is recommended, but that would take would 11 years and three months to save for.

RateCity spokeswoman Michelle Hutchison says a 20 per cent deposit would also reduce the chance of there being negative equity if property values fall.

She also recommends saving a further $10,000 to cover other costs such as upfront loan fees and stamp duty, in which case that would take 13 years to save for.

She says the study shows that housing affordability is still out of reach for many people.

'Despite lower interest rates and fallen property values, buying a home is still a distant dream for many Australians and the reality is that some will never afford home ownership in the areas they want to live,' Ms Hutchison said on Friday.

However, she said while these results may be overwhelming for would-be buyers, the period of saving can be reduced through a first home saver account, wiping almost a year on building up a 10 per cent deposit.