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Australian First Finance

Are you over 50 years of age seeking a  home loan?

10/4/2018

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How to increase your chances of Home loan approval

When applying for a home loan, banks and non-bank lenders impose variety of lending criteria and all have different policies in place that must be met before qualifying for finance. These include a stable income, proof of genuine savings, current debt, superannuation, current assets, good credit history​.

But what about your age?​

​Are there any restrictions on the age at which you can take out a home loan?
And what effect does age have on your borrowing power? ​

What is the maximum home loan age?

There’s no widely accepted maximum age limit at which you can qualify for a home loan. Australia’s anti-discrimination legislation, namely the Age Discrimination Act 2004 and National Consumer Credit Protection Act 2009, prevents lenders from discriminating against mortgage applicants due to their age.
“However” lenders also have a responsibility to ensure that anyone they lend to can comfortably afford to repay the loan without experiencing any undue financial hardships. With this in mind, the older you are, the more difficult you might find it to obtain home loan approval.
In the past, Australian lenders did not place any age limits on their mortgages. However over the past couple of years a number of lenders, have introduced limits on their home loans to borrowers over 50 years of age loans, there for reducing the loan time allowed up until retirement.

What does this mean and how does this affect you?

​By reducing the time span on a home loan from 30 years down to retirement age this increases your loan repayments considerably this in turn makes it harder to service a loan and can cause undue stress on the borrower.

Why are lenders reluctant to lend to older borrowers?

​Lenders are not allowed to discriminate based on age under the Age Discrimination Act 2004 and National Consumer Credit Protection Act 2009 however you still meet their lending criteria. This is based on your capacity to make timely repayments over the life of your loan with the loan term reduced considerably. The most important factor lenders take into consideration is your ability to pay off a home loan in a timely manner based on your income, it will take some work to convince the lender that you will be able to service the loan. And you do not present an unacceptable level of risk to the lender.
If you’re an older Australian and you apply for a home loan, the lender will assess your application in the same way they would for an application from an 18-year-old or a 38-year-old. “If” you have your finances in order and can demonstrate your ability to repay the loan, your application can be approved.

If you feel you are being discriminated against you can contact AFCA click here for the link or call 1800931678 to discuss your concerns they are there to help you.


How to get your loan application approved

While it is more and more difficult for older Australians to get home loans approved, it’s certainly not impossible. Keep the tips and advice below in mind to help maximise your chances of having your mortgage application approved:
  • Exit strategy. Most lenders will require the borrowers over 50 to supply a home loan exit strategy, this basically outlines what will happen to the home loan when you retire. And how you intend to pay down debt upon retirement. In addition to the usual information required in the application process you will also need to show how you will continue to pay off your loan during retirement. For example, you may need to sell an investment property to pay down your debt.
  • Minimise debt. The amount of debt you have is a very important factor a lender will take into account when assessing your loan application. Pay down existing debt before you apply to increase your chances of approval.
  • Save a bigger deposit. The more money you have saved, the more money the bank will be willing to let you borrow. If you can display proof of genuine savings and regular financial discipline, your borrowing power will increase dramatically.
  • Credit history. Are there any black marks on your credit file?
  •  Provide more financial evidence. If you’ve successfully repaid a previous mortgage, including this in your application will show that you’re a reliable borrower. A sizable superannuation balance can also help to convince a lender that you don’t pose an unacceptable lending risk.
  • Ask an expert. The most important piece of advice for older Australians hunting for a home loan is to ask a mortgage broker for help. A broker will be able to help you find the lender and loan most suitable for your needs, and can offer advice and assistance on how you can put together the best possible loan application to present to Lenders.



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You Need a good Finance Broker.  “It’s a mine field out there”

3/23/2016

 
A LOW interest rate environment is simply the “calm before the storm” prompting lenders to drastically increase the interest rates used to determine whether customers can service their loans.

Interest rates as high as nine per cent — more than double what many borrowers are now paying — are being adopted by banks assessing the repayment capacity of borrowers once rates do rise.

But raising the bar on “mortgage serviceability interest rates” will make it harder for eager first home buyers to get their foot on the property ladder.

Financial regulator “know that low rates are the calm before the storm.” Rates will rise

Every time rates have been low in the past Australian have borrowed to the hilt and then when rates have gone back up there’s been a surge in people missing their home loan repayments.

This is hard for first home buyers to comprehend why they are locked out of home ownership because their bank is assessing their borrowing power using double the actual interest rate.

The financial regulator, the Australian Prudential and Regulation Authority, "APRA" has revealed its crackdown on lending practices announced in December 2014 has resulted in lenders significantly shifting the interest rates used to work out if a borrower can cope with repayments should economic conditions change.

The new data released in the APRA Insight Issue used undisclosed hypothetical situations and then calculated what interest rates they would use to determine whether borrowers could meet their home loan repayments in a much higher interest rate environment.

Some Banks are basing the ability to repay their loan using rates ranging anywhere from more than six per cent up to 9.2 per cent.
 


Close the gates

3/9/2016

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Close the gates 
When people are constantly bombarded with doom and gloom regarding the financial news, this leads to doubt and worry, this in turn can lead to poor financial decisions.

When you turn on your TV you are hit with a flood of information, via different TV shows purporting to be NEWS and informative; be very wary.
Always be aware that any finance and brokering companies, within these shows have a vested interest & are more than likely to have paid the show to be there in the first place, they create a hype headline story to give you reason to listen.

To be completely in tune with the true facts, it’s imperative you do your own research and never rely on media hype, created by companies to suite their own goals.

Always keep control. There are many things financially we cannot control, for example, the Chinese economy and how Australia responds, but you can control how you respond.


I call this, ‘Closing Gates’!!!

Some examples are:
 
Superannuation -

Fees - are you paying too much?
Super - Is your super fund charging you 1.3% per cent on your current balance, and another companies charge 0.9% per cent?

That’s 1.2% per cent difference you could be saving.  When this is compounded over your working life, this is a considerable difference.

You need to take control and shop around.  This is compounding money that should be in your account, not the super funds account.

Here’s an exercise for you.  Ring 4 different super companies and find out what their fees are.

What % returns do they offer regarding the safety of the investments they make with your money?

Ask about their guarantees in regards to your hard earned money and always read the fine print.

As Australia is ever changing in regards to investment, it’s important to be in a good position when policy changes take place.

‘Close the Gates’

Investment properties -

If you are buying or own an investment property, is it negative or positively geared?

Does this property generate enough income to offset all costs?

Are you paying the short fall each week?

With the current political climate this may be an area you need to look at!

What if you:
·       Got sick
·       Lost your job
·       Are Self-employed and business is slow
·       If the Government rules changed and took away negative gearing, do you have anything in place to protect you?

What is your strategy?

How will you cope if a tenant vacated and it takes weeks to find a new tenant?

What’s your buffer?

Are you a real investor or do you just own an investment property?
Are you paying the best possible interest rate?
Have you got the most suitable product for your needs?
Are you paying for bank services you don’t need or want?
Do you go to the bank yourself or do you use a person that is experienced in their field to help you?

Do you have a good Finance broker?

Banks will offer headline rates in the windows to entice you in the door, however it’s ‘Buyer Beware.’  All that glitters is not gold.

For example, Do you know about:
 
·       Honeymoon rates
·       Revert rates
·       Fixed rates
·       P/I verses I/O
·       Variable
·       Fixed
·       Bridging
·       Combination
·       Splits
·       Lines of credits
·       Offsets both partial and 100%
·       Construction loans
·       Break costs
·       Exit fees

Do you know everything about these products, plus many more as well as bank policies?

Are you truly an expert or are you a customer of the bank?

Do you know if you’re the type of client they want?

Not all banks want you, but others would love you.

Each bank has different policies and these are ever-changing.

Are you 100% sure the bank, that you deposit your money into each week, has your best interest at heart?

Remember, each bank will only sell you their product and not recommend a different bank that has better rates and fees.

If you’re not an expert, find someone who is.  It’s very confusing out there.

I saw a story recently, regarding people who have been embezzled by a builder and are now stuck with mortgages on unfinished houses. This is obviously not the full story, there’s a lot more to this story however, if the full story was told it wouldn’t be as sensational. 

‘Close the Gates’
When building, you have construction loans in place; the banks pay these in instalments to protect the client and themselves.
The contacts should be fixed price (contracts or You should have a good solicitor that is independent, who is familiar with construction and building contracts.

Different solicitors specialise in different fields, much like surgeons.

Insurances should be in place to protect you.

Builder’s contracts should have a finish date clause, with penalties per day over the date of completion. They should include a clause making allowances for inclement weather; this period is usually two weeks.

Ensure the builder is fully registered and you have copies of their up-to-date Insurance Certificates.

Check that the builder doesn’t create a company, take your money, close the company then start a new one. As we have heard over and over, some developer’s do this quite frequently.  Also, this way, there is no comeback with building faults, once you move in.

It’s all about having the right people behind you every step of the way.

Good Solicitors, Accountants and good Finance Brokers.  Make sure the solicitors do all the right searches for you
 
My last word of advice is………..
 
Always remember to ‘Close your Gates’
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Saving for a home deposit

10/19/2015

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House deposits taking longer than ever to save for, report says

Saving for a house deposit is taking Australian couples longer than ever, according to a new Bankwest report.

The report shows Australian couples will need to save for an average 4.2 years to accumulate the almost $100,000 needed for a 20 per cent deposit on the median-priced home.
On average, they will need to save $5,900 more than they would have had to in 2014.
In Sydney, the time needed to save a deposit was nearly twice as long, at 7.9 years.

In contrast, Hobart first home buyers needed 3.4 years and Adelaide-dwellers 3.6 years.
Bankwest's Andrew Whitechurch said the increase in house prices was already having an effect on buyer behaviour, with the number of first-time buyers entering the market declining by 2.6 per cent in the year to June 2015.
"We can see that where first-time buyers may be struggling to enter the property market, it is exacerbated by more investors and non-first-time buyers being active in those markets," Mr Whitechurch said.
On average, couples wanting to buy in New South Wales face the longest saving times, with those on an average wage taking 5.3 years to save a deposit of $128,100. This is up from 4.8 years in 2014.
It will take 4.4 years to save a first home in Victoria, followed by 4.1 years in the ACT and 3.9 years in Queensland.
In the regions, the cheapest areas include Tasmania's West Coast and the Central Darling in far west New South Wales, where it would take first time buyer couples just eight months to save a deposit.
Deposit savings times were calculated on the basis of a first-time buyer couple setting aside 20 per cent of their combined pre-tax income annually.
Governments need to take lead on affordable housing: expert  The housing affordability problem is not confined to Australia, with the UK facing similar issues, according to Lord Bob Kerslake.
"I think Sydney and London are facing very similar problems," he told ABC News 24.
One of the problems for people is the price of housing is going up faster than their pay is going up. So the gap isn't staying the same, it's getting bigger.

Lord Bob Kerslake"You see boom cities growing rapidly, population growing, but housing supply just hasn't kept pace.
"What is happening is ordinary people are being priced out of housing and housing is becoming a speculative property investment and not a home."
Lord Bob said there was a good case for state governments to become the lead providers on affordable housing.
"Moving potentially to community-based housing association-type models as we have in the UK," he said.
"They can often provide a more focused, flexible management and tackle some of the other issues like employment that come up at the same time."
He also advocated shared ownership models, where people buy 70 per cent of the property and pay rent for the remaining 30 per cent.
"So you can basically get a property for a lower initial down payment and then over time, as the property rises or your income goes up, then you can buy out the rest of the property," he said.
"So it's a very powerful way of people getting on that housing ladder.
"One of the problems for people is the price of housing is going up faster than their pay is going up. So the gap isn't staying the same, it's getting bigger and shared ownership is a really smart way of helping people into that."
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Joint Tenants  & Tenants in common that is the question

9/28/2015

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When two or more people own a home, either as a joint tenancy or tenancy in common, each individual owns a share (or interest) of the entire property. This means that specific areas of the house are not owned by any one individual, but instead, are shared as a whole. While joint tenants are similar to tenants in common in many ways, particularly with regard to their right of possession to a given property, there are some important differences.


This article covers the basic differences between joint tenants and tenants in common. See Buying a House with Someone in FindLaw's Real Estate Law section to learn more.


Tenancy in Common While none of the owners may claim a specific area of the property, tenants in common may have different ownership interests. For instance, Tenant A and Tenant B may each own 25 percent of the home, while Tenant C owns 50 percent. Tenancies in common also may be obtained at different times; so an individual may obtain an interest in the property years after one or more other individuals have entered into a tenancy in common ownership.

Joint Tenancy Joint tenants, on the other hand, must obtain equal shares of the property with the same deed, at the same time. The terms of either a joint tenancy or tenancy in common are spelled out in the deed, title, or other legally binding property ownership document. The default ownership characterization for married couples is joint tenancy in some states, and tenancy in common in others see Top 10 Reasons for Unmarried Partners to Own Property as Joint Tenants).
A joint tenancy can be broken if one of the tenants transfers or sells his or her interest to another person, thus changing the ownership arrangement to a tenancy in common for all parties. However, a tenancy in common can be broken if one or more co-tenants buy out the others; if the property is sold and the proceeds distributed among the owners; or if a partition action is filed, which allows an heir to sell his or her stake. At this point, former tenants in common can choose to enter into a joint tenancy via written instrument if they so desire.

This type of holding title is most common between husbands and wives and among family members in general, since it allows the property to pass to the survivors without going through probate (saving time and money).

Right of Survivorship One of the main differences between the two types of shared ownership is what happens to the property when one of the owners dies. When a property is owned by joint tenants, the interest of a deceased owner automatically gets transferred to the remaining surviving owners. For example, if three joint tenants own a house and one of them dies, the two remaining tenants each obtain a one-half share of the property. This is called the right of survivorship.

Tenants in common have no rights of survivorship. Unless the deceased individual's will or other instrument specifies that his or her interest in the property is to be divided among the surviving owners, a deceased tenant in common's interest belongs to the estate.



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"Property Investors"

8/5/2015

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Property investors should get used to paying increasingly higher interest rates compared to people paying off a loan on a house they live in.  In the last two weeks, all four big banks have targeted property investors with interest rate rises of between 0.27 and 0.29 percentage points, moves they have blamed on rules that restrict growth in lending to landlords.

It comes on top of moves in May 2015 to scrap or cut lucrative interest rate discounts for investors taking out new loans.

Taken together, these two trends have opened up a two-tier mortgage market, something that was the norm with  some banks until the late 1990s.

Many investors are paying interest rates that are anywhere between 0.27 and 0.6 percentage points higher than those charged to owner-occupiers, depending on the bank.

The predictions this gap may widen in months to come, as banks respond to the Australian Prudential Regulation Authority's demand that housing investor loan growth slow to less than 10 per cent a year.

Further increases in banks' interest rates for property investors are expected as banks are trying to avoid being the cheapest lender for investor loans, which would risk leading to an influx of customers. It is expected that interest rates for most investor loans are likely to be 0.4 percentage points to 0.9 percentage higher than rates for owner occupied loans by the end of this year.

The recent rate rises also come as some investors question the outlook for profit growth, with listed investment company Argo Investments saying it would be hard for bank share prices to rise much over the next 12 to 18 months.

During the three months to June, Commonwealth Bank, ANZ and NAB all expanded in housing investor lending at a quicker annualized pace than APRA's 10 per cent a year limit, Goldman Sachs analysts said on Monday.

There is currently a  global debate among regulators about whether investor property loans are riskier for banks, and should therefore attract tougher capital buffers.  

The general con-censors be you could see a 70 to 80 basis point gap between owner-occupier and investor as we move forward into the next year," he said.

With banks' growth in the investor market restricted, there is also likely to be growing competition for owner-occupier customers.    This is already evident, with the major banks slicing fixed interest rates for these borrowers.

However you will notice further tightening of banks' credit policies.

"Many of Australia's lenders have made some sweeping adjustments to their lending policy in recent weeks and it is expected that we will see more changes moving forward.



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APRA tightens loan restrictions in May

6/13/2015

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 Discounts that were otherwise applied to investment lending are being removed.

Lenders have now accepted APRA's tougher stress tests.

The regulator prefers a 7 per cent interest rate floor when deciding whether borrowers can handle future rate rises. This will caused some banks to lift their tests by a full percentage point.

"Typically you may have had a benchmark that was maybe 150 to 200 basis points above the variable home loan rate, in practical terms that means something like 6.5, 6.25 to 6.5 per cent," he said.

The big four and smaller lenders have also tightened income assessments.

That means not counting 100 per cent of rental income, dividends, bonus pay and other highly uncertain earnings.

It also means banks are now looking at borrowers' actual spending, not just using a standard poverty-line benchmark which many had used previously.

The banks are setting quite aggressive sales targets to their loans officers, often linked to bonus and incentive payments.

At present ING Direct - which already had tighter lending standards than many institutions, with a floor stress test rate of 8 per cent - made New South Wales a special case, telling brokers it would not accept investor loans for more than 80 per cent of the property's value.

Anywhere else in the country, 90 per cent is its new loan-to-value limit for property investors.

It also joined a large number of banks cutting interest rate discounts for investment loans, across the board from the vast majority of lenders, where discounts that were otherwise applied to investment lending are being removed.

"That's going to have an impact across the market."

'Risk increases' as borrowers look beyond banks

APRA only regulates authorized deposit taking institutions, such as banks, credit unions and building societies.

A raft of mortgage finance companies can largely set their own standards.

"History has shown us that when you restrict access to conventional finance and credit consumers then go and find it elsewhere, and the level of risk to them increases," he warned.

This could open up a can of worms in regards to cowboy lending companies, and possible rogue behavior within bank branches.

"Many mortgage brokers have stories where they've assessed that a loan would not be in the interests of a borrower and then they've the borrower gone down to the local branch of the bank and the bank has written the loan," he said.

The big concern is that the incentive-based model that got the big banks in trouble over dodgy financial planning also exists for home loans.

That means the culture at the coal face may not reflect the standards set at head office.

The issue they have difficulty managing is at the branch level they're setting quite aggressive sales targets to their loans officers, often linked to bonus and incentive payments, and that's where the opportunity for poor practices and over-aggressive lending can come in.

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What is diversification of Assetts

6/2/2015

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We have all heard the old adage – “don’t put all your eggs in one basket”- well, investing is no different. 

By spreading invested funds across a number of different assets you can reduce the overall risk for your portfolio, as you’re not relying on only one or two assets as your investment.

It’s called ‘diversification,’ and while it doesn’t guarantee that you won’t make a loss if the general direction when markets are down, it can reduce the risks associated with investing.


The world changes every day with unpredictable political, social and economic factors that can move markets very quickly and not all markets react in the same way. It is best to spread your risk over multiple markets and assets so your whole portfolio does not get caught in any single negative event.

The aim is to hold assets that do not always move up and down together all the time. 
Australian First Finance can help you buy your dreamp property anywhere in Australia
This is called low correlation – as one investment doesn’t perform, hopefully another investment in your portfolio goes up and therefore creates a balanced result for the portfolio overall.

On any day, some of your assets may win, some may lose, but overall the result should be that the portfolio rises in value in the long term.

But diversification isn’t just a protective measure; it may also allow you to generate a higher rate of return for a given level of risk.
There are several different kinds of diversification. There is diversification across asset classes – cash, fixed interest, shares and property held throughout different States as well as types of property held. 

Finally there is diversification within an asset class – as in having a diversified share portfolio of different companies and industries.
Studies have shown how you diversify your portfolio – or your asset allocation – can be one of the most important investment decisions you make.

Diversification is not simple, so we recommend you seek financial advice before making any decisions about your investments, to ensure your choices are appropriate to your personal objectives, financial situation and needs.

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PROPERTY A FIRM FAVORITE

5/29/2015

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PROPERTY A FIRM FAVORITE
 
Following a strong run in many locations in 2014, sound investment fundamentals and low interest rates continue to make well-selected property an attractive investment selection in 2015.

 A record number of investors hit the real estate market last year, creating a buying and selling frenzy across many parts of the country. According to Domain Group’s senior economist Andrew Wilson, a colossal 14,500 homes were listed for auction over September to December, compared to 12,584 for the same period in 20132.

 Over the course of 2014, capital city house values grew by 7.9%3. Gains were strongest in Sydney, with year on year growth of 12.4%.

With the Reserve Bank of Australia reducing the official cash rate to a historical record low, and a rise in interest rates unlikely in the short to medium term, property is likely to remain a popular investment options.

 But it’s not just low interest rates that make property a popular investment option. Here are some of the key reasons for property’s persistent appeal:

It’s simple: Property has proven itself to be a trusted wealth creation tool that is often easier to understand than other complex investment options. And with a long-term investment approach and a good property manager it can largely be a set-and-forget type asset, that doesn’t require daily input on an investor’s behalf.

 Steady returns: Property offers both the potential for capital growth over times as well as ongoing passive income in the form of rent – a compelling combination for long-term wealth creation.

Your dollar goes further: Many lenders will finance up to 90 per cent of the value of the property based on the lender’s valuation – generally more than is available for other asset classes.

 Manufacture capital growth: Smart improvements can quickly push a property’s price upwards, enabling investors to speed up returns.  With the heady spring and summer months now behind us and low borrowing costs continuing, autumn could prove a good time to buy for many. Remember, if you’re looking to explore the property market, it pays to have your finances in order so you can be ready to act when the right property pops up.

 Getting an indication of your borrowing capacity will also help you to narrow your property search appropriately.

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                   A CRACKDOWN by the banking regulator could mean                                       cheaper home loans for first home buyers.

5/20/2015

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A CRACKDOWN by the banking regulator could mean cheaper home loans for first home buyers. The Australian Prudential Regulation Authority (APRA), which oversees the banks, has imposed new rules to slow the growth of lending to investors, which could mean a better deal for owner-occupiers, who are often first home buyers.

This means that people paying off the home they live in are likely to become the new prime customer of banks, Fairfax reports. This fiercer competition could lead to cheaper home loans for owner-occupiers than what is offered to investors.

First home owners are increasingly competing against investors for the same properties. March housing finance statistics showed investors accounted for 40 per cent of property sales.

The National Australia Bank is among the lenders that has offered a better deal to owner-occupiers, with a 0.15 per cent interest rate discount offered to people living in the home they are paying off.

APRA has imposed a cap to slow the growth of credit offered to investors to less than 10 per cent a year, in order to rein in the risk that loans will not be repaid.

It is yet to be seen how each bank will respond to the measure.

NAB’s Anthony Waldron told Fairfax that he believed more banks would offer “differentiated pricing” to comply with the new rules.

“Within a 10 per cent cap, I think you will see that play out more and more over the next few months, as we see people really try to grow their owner-occupied books and operate within the guidelines set out by the regulation,” he said.

However, Michael Rafferty, of the University of Sydney’s School of Business, said the banks’ change in priorities was more to do with mitigating risk than giving first home buyers a fair go.

“They’re not interested in the fairness of housing. It’s about who are the lowest risk borrowers,” Dr Rafferty toldnews.com.au.

He said APRA argued that owner-occupiers were more likely to repay their loans because they tended not to walk away from home ownership, while a person taking on more debt for a second or third home was a riskier proposition.

“People hang on to home ownership as long as they can: they stop going out, and stop buying cars … So the argument is being put that selling homes to new young couples to live in is considered a safer bet than an investor,” he said.

Dr Rafferty said there had been a significant change in the way Australians looked at the property market, which had made it increasingly difficult for younger people to buy their first home.

“We’ve allowed housing to become a form of saving, when it used to be seen principally as place to live in,” he said.

“As a consequence, you’ve got all these investors and all sorts of other people securing housing like they’re playing the stock market.

“A young person in their 20s trying to pay off their HECS debt is looking at the housing market and seeing it whizzing past. It’s changed housing in less than a generation and that’s a big concern.”

Dr Rafferty said unions were involved in securing affordable housing for their members in decades past, but now it was seen as a dilemma for individuals, or considered only a concern for people on welfare.

“Today, I don’t see any institutional champion for people wanting to change the direction (of housing affordability),” he said.

Despite the difficulties, Dr Rafferty said younger Australians should continue to pursue the dream of home ownership, because it had it had other social benefits, such as offering security of tenure in the one home and helping people support themselves in retirement.

Record-low official interest rates of 2 per cent continue to make property an attractive investment.

Investors have led unprecedented growth in Australian home loan approvals, which has led to an overheated property market, particularly in Melbourne and Sydney.

The amount of home lending grew 3.8 per cent to a record $31.3 billion in March, helped by a $12.9 billion surge in borrowing by investors.


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    Liane is an extremely experienced and down to earth Mortgage Broker. She has a very personal approach to determining your wants and needs, and matching them to the right finance structure.

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    Close The Gates
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