The Reserve Bank of Australia’s (RBA) interest rate cuts in March 2020 was our first out of cycle reduction since 1997, leaving our cash rate at an all time low of 0.25%. The cut has been designed to help offset the calamity caused by the COVID-19 pandemic and has been one of the many measures the RBA has announced to help support our economy right now.

For first home buyers that are looking to jump on the property ladder, this creates a great opportunity to break into the market as the cost to borrow money from the bank has never been cheaper!

Combine this with reduced supply, more urgency to sell, and value right now in Perth’s market, it’s easy to see why the perfect storm is brewing for first home buyers to jump in to owning their first property.

Home loan interest rates were at historic lows before the latest cuts and finance experts are saying we could possibly see further cuts but, right now is the perfect time to get the best deal you can on a home loan and put your savings to work. According to realestate.com.au experts, activity from first home buyers hit a 10-year peak in December 2019 and has remained high despite the uncertainty over how the coronavirus would affect the market. According to the latest figures from the Australian Bureau of Statistics (ABS), loans for first home buyers have hit their highest growth rate since 2009.

How can you take advantage of low interest rates?

Lower repayments on your home loan frees up a lot of money in your household budget, allowing more cash for saving, investing, renovating, or simply more to spend on the things you love to do. For example, if you borrow $400,000 with a 3.86% interest rate you could potentially save $93,794 in interest over the life of the loan if you were able to switch to a loan with a 2.86% interest rate. Paying less interest on your loan, also gives you an opportunity to get ahead and pay down your load much faster. Using the same scenario above, if you were in a position to make the same repayments that you would on the higher interest rate of 3.86%, you could be in a position to pay off your loan four years and two months sooner. That’s a nice little bonus of being in a position borrow money cheaply!

According to Canstar Group executive of financial services Steve Mickenbecker, to get the lowest rates, buyers need to present themselves as desirable customers to the banks. That is, banks want to deal with people who can repay their loans, and have a good credit and savings history. Banks are eager for business right now, so if you’ve been sitting waiting for a great time to secure your first property, you’ll find that the low interest rate environment is an ideal opportunity to put your savings to work.

How long will the rate last?

It’s uncertain if the RBA is prepared to go even lower or if money as cheap as this is here to stay. We’re still in an environment of uncertainty amid the coronavirus pandemic and the interest rates have been designed to help ease pressure on property buyers and existing home owners during a time where economic conditions are not great.

If you’re in a position to buy your first home, there are many opportunities to help you succeed in the current market climate.

young couple first home

Top 6 benefits for First Home Buyers in the current property market climate


The First Home Buyer Deposit Scheme

Originally coming to a halt at the end of January 2020, the First Home Buyer Deposit Scheme has been extended in the wake of COVID-19. The First Home Loan Deposit Scheme allows eligible first home buyers to borrow from participating lenders with a 5 per cent deposit and stamp duty discounts for purchases under $800,000, with the federal government going guarantor for the remaining 15 per cent. This scheme effectively helps first home buyers get into their own property sooner without paying lenders mortgage insurance premiums.

Record Low Interest Rates

At the beginning of April, the Reserve Bank of Australia (RBA) made the decision to cut the cash rate to an unprecedented low. The cheapest variable home loan rate on offer sits at just 2.49 per cent and rates could drop even further. Following market consensus, the RBA has left the official cash rate unchanged at 0.25%.

According to smartpropertyinvestment.com.au, before the rate announcement, comparison site Finder surveyed 23 leading economists with everyone suggesting the Reserve Bank will hold interest rates.

Chief economist Nerida Consisbee said, “government benefits were proving a strong incentive for first-time buyers to stay active in the marketFirst-home buyers may be just as stretched as everyone else but they still need a place to live,” Ms Conisbee said. “They also, traditionally, become more encouraged when they sense there is better buying.”

Less competition

Less competition is a good thing for first home buyers. This means the market isn’t moving forward in leaps and bounds and that’s okay. Prices won’t be pushed up by keen investors with deep pockets and traditionally, particularly in the city, first home buyers and investors often go for the same types of properties – meaning the playing field is quieter for those looking to get into their first home.

Lenders are enthusiastic

Before the world changing effects of COVID-19 came into play, lenders had lessened the restrictions for first time borrowers. By July 2019, APRA had relaxed their restrictions around how lenders assessed a prospects ability to meet repayments through reducing the required buffer from a minimum interest rate of 7 per cent to 2.5 per cent. Therefore it’s a lot easier to get finance than it was previously. Combine this with what experts perceive to be a stagnant interest rate for the foreseeable future and you have a rewarding property climate for first home buyers.

Sellers are more likely to meet the market

As soon as the government announced social distancing measures, many sellers withdrew their properties from the market, alarmed that property prices would change in the coming weeks. Many were also frightened by the notion of letting strangers in to their home with a deadly virus in the midst. Now as we move towards flattening the curve, many sellers who are ready to list their properties are more likely than ever to listen to the offers coming in.

Incentives are still available

While technology is at the forefront of how real estate is to be sold for the foreseeable future, government assistance for first home buyers has remained the same. The First Home Owner Grant and exemptions for stamp duty are still available, which you can find at firsthome.gov.au. This, combined with the First Home Loan Deposit Scheme are kick starters to getting your foot in the front door of your first home.

Trying to find the perfect property for your first home can be a daunting experience. With so many options available it can be an exhausting and cumbersome process. To find the perfect balance, it’s imperative to find something both affordable and that fits your lifestyle, accommodating to your budget and ticking all of your desired boxes.

>> See why Halcyon is the perfect choice for first home buyers here. 

If you need assistance with your first home purchase or you’re wanting to take advantage of our fantastic financial incentives then get in touch with our project management team or give us a call today on 0435 407 837.