7 in 10 buyers prepared to move without a 20% deposit
As house prices rise, buyers are increasingly looking to alternative finance pathways to purchase their next home.
A report from finance provider Helia has revealed that over three-quarters of all prospective home buyers have saved less than a 20 per cent deposit, marking a stark departure for tradition.
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As the cost of living rises and savings rates continue to plummet, Helia has stated that the traditional 20 per cent deposit is not “realistic or required” in today’s housing economy.
The trend is particularly acute among first home buyers, who are setting their sights on lender’s mortgage insurance (LMI) to make up their deposit shortfall.
LMI is a one-off premium that a low-deposit buyer pays a mortgage lender as insurance against financial risk, with the aim of protecting the lender if the buyer is unable to repay their loan.
According to Helia, nine in 10 first home buyers have considered using LMI to purchase their home, a massive 20 per cent rise from last year.
Interest in LMI among buyers who already own a property is weaker than the first home buyer cohort, but still substantial, with data showing that 55 per cent of all buyers used LMI to purchase their property this year.
Other alternative finance pathways considered by prospective buyers are government assistance schemes (48 per cent), and the bank of mum and dad (45 per cent).
Greg McAweeney, chief commercial officer of Helia, said that “it’s heartening to see in our research that most prospective buyers are showing resilience in the face of the current market challenges and researching alternative ways to achieve their home ownership dreams”.
He highlighted the uptake of LMI among investors, as well as owner-occupiers, especially as rentvesting takes up among younger aspiring home owners.
“LMI offers investors the key to unlocking the property market with confidence. It offers investors greater flexibility in their investment strategies, whether they aim to purchase a single property for long-term capital appreciation or build a portfolio of properties for rental income.”
“LMI allows investors to tailor their approach to suit their financial goals and risk appetite, enabling them to maximise their potential returns and build wealth through strategic property investment, sooner,” McAweeney said.