Triple whammy hits new home buyers | Whitsundays Property | Real Estate News for Whitsundays, Australia

AAP

MANY would-be home buyers have given up the dream of home ownership, hit by a triple whammy of rising interest rates, tougher lending conditions and an end to the federal government's more generous grant.

A survey by mortgage broker Loan Market found 28 per cent of respondents said they had put off their home buying plans indefinitely, while 32 per cent said they were trying to save for a larger deposit.

The online survey of 260 potential first time home buyers found 33 per cent of respondents were still looking to buy a property this year.

"Tighter lending restrictions which require genuine savings contributions of around five per cent towards the property purchase means that many first-time buyers are facing problems getting finance approved," Loan Market national operations and risk manager Ivan Karamatic said releasing the survey results on Tuesday.

In a separate Loan Market survey of 215 mortgage brokers it found that 86 per cent cited a lack of savings as the single biggest reason applications from first time buyers were declined.

"Unfortunately, no lender recognises ongoing rent payments as a component of genuine savings," Mr Karamatic said.

"Saving five per cent of the purchase price of a property whilst at the same time paying rent is certainly a challenge for many."

Buyers had been using the increased first home buyers grant to contribute to their deposit, but this concession returned to its traditional $7,000 level at the end of 2009.

Economists also expect further interest rate increases this year by the Reserve Bank of Australia (RBA) after it raised the cash rate for a fourth time in six months last week.

The Australian Bureau of Statistics will release housing finance data for January on Wednesday, the first snapshot since the end of increased grant.

The grant, as part of the government's economic stimulus, helped to lift the proportion of first home buyers taking on a mortgage to a record 28.5 per cent last May. It was 21 per cent in December.

Still, economists expect there will still be flow-through demand for home loans more broadly in Wednesday's data, with forecasts centring on a two per cent increase in January compared to the previous month.