Early this week, four of the big banks in Australia made the landscape perfect for first home buyers. The banks are expressly favoring depositors over investors by holding back on passing rate cuts in full and by lifting deposit rates instead. Property investors from China have to face new difficulties in getting money from the mainland because of the absence of finance provision within Australia. With the exception of certain pockets in Sydney and Brisbane, the prospects of acceptable price growth are quite slim in most cities.
All the remarkable developments in the property market actually benefit first home buyers. In previous years, investors have always been given the upper hand and first home buyers have to take the back seat. Traditionally, the level of first home buyers ranged from 30 to 40% but in the wider lending market, the rates fell to below 20%. However, with the recent developments, lending to first home buyers is expected to rise again.
On the other hand, investors are starting to feel the tight squeeze on two fronts. Millions of investors who are dependent on fully franked yields from their bank stocks fear that the battle for depositors will bring in more trouble. According to Brian Johnson of CLSA, the business of offering higher deadline deposit rates through banks like CBA and NBA while RBA is dropping its official interest rates can be quite expensive.
The trade-off between holding back on rate cuts and lifting rates will tend to be losing game because bank net interest margins will be negatively impacted. In simple words, bank stocks that are already struggling with capital demands and maxed out dividend payout ratios cannot afford a battle for cash deposits should it ensue. On the other hand, the vacuum that will result from loss of existing investors will pave the path for first home buyers.
Buying a first home can be challenging particularly if you are not knowledgeable enough with the property market; however, first homeowners centre is prepared to provide assistance from finding the right financing to searching for an ideal home that will suit a specific budget.