With the first home owner grant due to be reduced soon, there are growing concerns for first home owners and their mortgages.
Experts have been commenting for a while now that many first time buyers in recent months have been borrowing higher amounts than ever before and the average first home loan is now $23,00 higher than last year.
Economist with TD Securities Annette Beacher says the boost to the grant may have inflated property prices. While the grant increase has done what it was meant to do, and supported the housing economy, there could now be some down sides becoming evident as we move into 2010.
As interest rates begin to rise later this year as expected, perhaps by up to 2 per cent over the coming year, many first home owners could find themselves stretched to make their mortgage repayments.
On top of this, the building industry could see a big slowdown as the grant boost winds down and this group of buyers become less prevalent in the housing market.
"The boost has obviously worked, because we've seen a pick up in housing finance, a pick up building approvals.
"There's also a strong possibility that there will not be any aspiring first home owners left by next year." said Ms Beacher.
The boost to the First Home Owner's Grant was announced last October as part of a government stimulus package designed to help Australia avoid a recession. Since the boost came into effect, more than 53,000 people have received the more generous grant.
From October 1, the grant will be reduced from $14,000 to $10,500 for existing homes, and from $21,000 to $14,000 for new homes. Then from December 31, the grant reverts to it's original $7,000 for both categories.
ANZ bank are predicting the Reserve Bank will start lifting official interest rates from 3 per cent as early as November.
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