Western Australia’s housing market is seeing a dramatic surge in mortgage sizes, with the average loan amount skyrocketing by $75,000. This increase is linked to the national rush of buyers trying to secure property ahead of Labor’s highly anticipated First Homebuyer Scheme. The scheme, set to launch soon, promises to help first-time homebuyers get into the market with a low 5% deposit, but it’s also contributing to rising house prices and more borrowing.
The Mortgage Surge: What’s Driving It?
The big question on everyone’s mind is: what’s driving this sudden spike in mortgages? While there are a few factors at play, the most obvious one is the looming arrival of the First Homebuyer Scheme. Buyers and investors alike are scrambling to lock in deals before the scheme kicks in, which has led to a rush of demand for housing. This has put significant pressure on the market, particularly in Western Australia, where prices are climbing fast.
Interestingly, the increase in mortgage sizes isn’t just confined to first-time buyers. Existing homeowners, too, are jumping into the market, either upgrading their homes or tapping into the increased equity of their properties. The fear is that the government’s well-meaning attempt to help new buyers may inadvertently push prices even higher, making it harder for others to get a foot in the door.
The Effect of the First Homebuyer Scheme
Labor’s First Homebuyer Scheme, which promises a 5% deposit for first-time buyers, is a bold attempt to address the housing affordability crisis. On the surface, it seems like a great solution to help people enter the property market. After all, housing has become increasingly out of reach for many Australians, particularly younger buyers trying to navigate skyrocketing property prices.
But here’s where things get tricky: while the scheme might make it easier for buyers to enter the market, it also has the unintended side effect of driving prices up, explains Thewest. As more people jump into the market with the help of the scheme, demand increases, and so do prices. Essentially, what was once affordable becomes less so, as sellers are well aware that the demand is only going to rise with the new scheme.
The Broader Impact: Rising Prices and Mortgage Stress
For those already in the market, the surge in mortgage sizes comes with its own set of challenges. Homebuyers now face even higher debt levels, which may lead to mortgage stress in the long term. The higher the loan, the more pressure there is to keep up with repayments, especially if interest rates rise or living costs continue to climb. This could push some homeowners to the brink, especially as the cost of living continues to bite.
Another consequence of this rush? Investors. More buyers in the market means more competition, and it’s not just owner-occupiers who are looking to buy. Investors are also making a play, looking to secure properties in anticipation of rising rental demand. This could make it even more difficult for regular buyers to find affordable homes.
A Mixed Bag for Buyers
For first-time buyers, the prospect of a 5% deposit may feel like a lifeline, but it’s clear that the broader housing market dynamics complicate things. While the scheme might offer a path to homeownership, it also risks pushing them into a market that’s getting harder to navigate. For others, the fear is that the housing bubble could burst under the weight of increased demand, leading to higher levels of mortgage default and financial strain.
As we look ahead, it’s clear that Western Australia’s housing market will continue to feel the effects of the First Homebuyer Scheme. Prices will likely keep climbing, and mortgage sizes will keep increasing, pushing many buyers further into debt. The question now is whether the government’s attempts to help buyers can outweigh the unintended consequences of rising demand and higher house prices.
