Analysis of the latest ABS data also shows that the number of new loan commitments for first home buyers have fallen about 48 per cent since its peak in January 2021. 

In a conversation with Lawyers Weekly, Legal Home Loans general manager Aylin Unsal (pictured) said this decline in first home buyer activity could be a result of increasing interest rates — the RBA decided to increase the cash rate by 50 basis points in September.

“From a lending perspective, the increase in interest rates means home loan applicants are assessed at a higher servicing rate, which ultimately decreases their borrowing power. This may be deterring first home buyers if they can’t currently borrow the amount they had hoped for,” Ms Unsal said.

“It may also be a matter of perception, because when market sentiment changes first home buyers tend to be the most affected. Due to their lack of experience, they may be following the media or advice of friends or family for what to do. For example, investment purchases have been holding fairly strong this year as a comparison.”

In terms of how young legal professionals are viewing the property market right now, Ms Unsal explained that most first home buyers are nervous to take the plunge.

“There is currently perception in the market from the media that property prices are expected to drop, and this may be making first home buyers nervous about getting the ‘right’ timing. However, there’s no actual certainty around property price prediction, and generally, it is high-value properties that are the most affected,” she said.

“Being brave to purchase in a less confident market could mean competing with fewer buyers and could be an opportunity. It is more of a buyer’s market now than it has been over the past five to 10 years with vendors and agents having to temper their own expectations with prospective buyers. Given rates are unlikely to go back down next year, first home seekers who are in a ready financial position shouldn’t wait if they find the right home.”

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In fact, first home buyer activity has now returned to a level lower than what was recorded pre-pandemic, according to Zippy mortgage brokerage financial director and principal broker, Louisa Sanghera.

“Back then, first home buyers had been increasing slowly after many years on the sidelines because of the high property prices at the time — or so they seemed in retrospect,” she said.

“However, the government’s popular HomeBuilder scheme changed that scenario, with a significant proportion of the 113,000 applications likely to have been first-time buyers, keen to make the most of the financial grants that were available.”

Ms Sanghera said owner-occupier and investor activity was reducing more generally because of the higher interest rate environment, which was creating plenty of opportunities for prospective property owners in a time of rising interest rates.

“Now that might sound counter-intuitive, but would-be property owners are the ones facing the fewest lending troubles at present, because they are borrowing ‘clean skins’ so to speak,” she said. 

“Borrowers with existing portfolios are often experiencing lending challenges at present, but not so much for people who are applying for their first-ever home loan. I do believe it’s a great time for first home buyers to purchase right now — especially in Sydney because we have seen such a significant softening in prices since last year.”

For lawyers looking to buy their first home, Ms Unsal advised them to get their pre-approval before searching for a property — as well as to speak to lawyer-specific mortgage brokers.

“First home buyers may not realise that online borrowing calculators do not factor in all the necessary information for an accurate figure, and your borrowing capacity can vary from lender to lender. It’s best to speak to a trusted adviser, such as a mortgage broker, for a proper assessment of what you can really afford to buy. If it’s your first home, depending on the state you purchase in there will be various incentives or grants you may be eligible for.

“It’s best to build a realistic budget plan, with clarity on what you qualify for and what costs will be added onto the property value that you need to keep in mind, such as stamp duty and conveyancing fees. As a legal professional, speaking to an expert of your industry such as Legal Home Loans may open further doorways, as you may be eligible to get a waiver on Lender’s Mortgage Insurance (LMI) and enter the property market with a lower deposit. Doing the upfront work will put you in the best place to purchase when you find the right one — with pre-approval in hand.”

Moving forward, lawyers can expect to continue to benefit from the LMI waiver, as well as stabilising interest rates.

“On average, major banks predict the cash rate to get to 3.5 per cent, so we do see interest rates levelling out and stabilising in the new year, which should give prospective buyers greater certainty for budgeting purposes,” Ms Unsal added.

“If your bank or broker has advised you that you will need to pay for LMI with a deposit smaller than 20 per cent, be sure to speak to us at Legal Home Loans as this may not be the case. We have heard this from many clients. This may be true for you with some lenders, but not all, so it is important to speak to an expert who understands your options in depth before making a decision.”