Mortgage lender Resi is urging caution among first home buyers as low interest rates and first home owner grants push many into home ownership for the first time.
Lisa Montgomery, head of consumer advocacy is warning consumers not to rush into "risky, spur-of-the-moment purchases".
"A characteristic of first home buyers is they have a small or no deposit at all (and) with the small equity in the property to start with, there is the likelihood that they might be in a negative equity position if the property price falls further," he says.
"Rates are cyclical and we are coming to the end of that cycle, that downward trend, so it's best to prepare for what has most recently occurred," Montgomery says.
First home buyers have been active in the market recently with sales to first home owners increasing to 26.5 per cent of all mortgages arranged in January. This was up from 25.7 per cent in December and 23.6 per cent in November. Numbers have never been so high, and have not been since since records began in 1991.
The boost to the First Home Owner Grant as well as falling interest rates is thought to be the main reasons behind the increase. Recently the grant was increased to $14,000 for existing properties and $21,000 for newly constructed homes.
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