What more homebuyers are asking their brokers about

IN Partnership with

As traditional paths to property ownership become steeper, more homebuyers are exploring alternative avenues, like LMI, to secure their future financial security and get on the property ladder

THE PRICE of hesitation can sometimes be higher than the price of action – a lesson that more homebuyers are learning in the current economy. Aspiring homebuyers are turning to alternative strategies to plant their flags in the property landscape as the traditional notion of saving a 20% deposit shifts under the weight of high living costs and stagnant wages. With affordability at historic lows, aspiring homebuyers are turning to lenders mortgage insurance (LMI) and family-assisted financing to help them achieve their

At Helia, we exist to accelerate financial wellbeing through homeownership, now and in the future. As Australia’s first lenders mortgage insurance (LMI) provider and a specialist in the field, we’ve played a pivotal role in the property market since 1965. Helia is passionate about supporting mortgage brokers with educational resources and tools to enhance client conversations around homeownership and LMI. Our resources library includes videos, fact sheets, infographics, estimators and more – all developed to help homebuyers understand how LMI can help them achieve their dreams of homeownership sooner.

Find out more

Housing affordability at record lows

Top 20% income earner

“LMI allows homebuyers to secure a property with as little as a 5% deposit, eliminating the delay that is caused by waiting years to save a full 20% deposit”

Greg McAweeney, Helia

dreams of homeownership. Many are even considering interstate moves or investment properties to secure a foothold in the market. As homebuyers grapple with financial pressures, flexibility has become essential in the pursuit of the Great Australian Dream, reshaping how Australians think about homeownership.

For many first-time buyers, the prospect of saving a 20% deposit feels impossible. With living costs climbing and wages not keeping pace, the traditional path to homeownership is becoming increasingly narrow. Helia’s latest Home Buyer Sentiment Report paints a stark picture, with few first home buyers still believing they can accumulate enough savings. “Our research shows that only 15% of first home buyers believe they are likely to save a full 20% deposit,” says Greg McAweeney, chief commercial officer at Helia. This savings struggle is pushing homebuyers to consider other avenues, with 84% of first home buyers believing it’s better to buy sooner with a smaller deposit than delay purchasing to save more. While affordability has long dominated the conversation around homeownership, the report highlights a shift: cost of living has overtaken housing prices as the primary barrier. Everyday Australians are struggling to meet essential expenses, making it harder to save for a deposit or keep up with mortgage repayments. This trend affects aspiring homebuyers across income brackets, with many first home buyers cutting back on leisure, personal grooming and even essential medical treatments to stay on track financially. The report also reveals that 70% of renters had experienced a rent increase in the previous 12 months, heightening the urgency for renters to transition into homeownership. However, their ability to do so is often thwarted by ongoing financial pressures, with 24% of first home buyers saving less than 10% of their household income.

Enter LMI, which is gaining traction as a bridge over the deposit gap. LMI allows homebuyers to purchase a property with just a 5% deposit, effectively fast-tracking their entry into the market. “LMI allows homebuyers to secure a property with as little as a 5% deposit, eliminating the delay that is caused by waiting years to save a full 20% deposit,” McAweeney explains. The appeal of this approach is clear – more than 64% of homebuyers now prefer to pay for LMI to get into the market sooner. It’s a calculated trade-off to pay a premium now and start building equity earlier, rather than risk being priced out of a rising market while saving. Indeed, home affordability is at unprecedented lows. According to PropTrack, a median-income household earning over $112,000 per year can now afford just 14% of homes across the country – the lowest share on record. Three years ago, this figure was 43% of homes.

The ‘bank of mum and dad’ has long been a cornerstone of first-home purchases in Australia, but even this form of assistance is evolving. Direct contributions to deposits have decreased from 60% in 2023 to 47% in 2024, and parents are finding new ways to support their children’s property dreams.

“Families are more commonly assisting with the cost of the LMI fee, with 10% of first home buyers receiving this type of support in 2024,” McAweeney says. This shift indicates a more nuanced approach to family assistance, with parents seeking ways to help that don’t involve large lump-sum contributions. The nature of support is diversifying: families are now helping with ongoing costs such as mortgage repayments and fees – up from 15% to 25% over the past year. This underscores a transition towards more sustainable and spread-out assistance rather than large, one-time contributions. Helia has responded to this trend with its Family Assistance LMI product, offering a 15% discount on LMI costs for both owner-occupier and investment loans when family members cover the upfront LMI fee. This innovative approach allows families to support their children’s homeownership goals without the risks associated with being a guarantor.

smaller properties and apartments to increase affordability. The search for one- to three-bedroom homes is rising, with a noticeable 76% of homebuyers focusing on capital city markets. Flexibility is emerging as a key characteristic of today’s homebuyers, who are willing to sacrifice some elements of their ideal property for the financial benefits of entering the market sooner. Other flexible solutions are also at hand. Recognising that not all homebuyers have the savings available to pay for LMI up front, Helia has introduced a product that allows the LMI fee to be paid monthly. “Monthly LMI helps homebuyers enter the market sooner without needing to save the upfront LMI cost,” McAweeney explains. “Mortgage brokers should discuss the availability of this option with their aggregators.” This flexibility is crucial in a market where timing can make a significant difference to a buyer’s long-term financial position.

A family couple sign a lease meeting with a realtor or homeowner, purchase the first mortgage and mortgage ownership concept.

The deposit dilemma

Lenders mortgage insurance as a stepping stone

Published 11 Nov 2024

“By not offering LMI as an option, mortgage brokers risk missing clients who might have otherwise been able to afford a mortgage with a smaller deposit and LMI”

Greg McAweeney, Helia

Median income earner ($112,000 pa)

Bottom 20% income earner

50%

14%

Source: PropTrack Housing Affordability Report, August 2024

Source: Helia Home Buyer Sentiment Report, September 2024

Strongly agree

30%

Do first home buyers think it’s a good time to buy?

Somewhat agree

Somewhat disagree

Strongly disagree

47%

30%

18%

Awareness of LMI has grown in tandem with the affordability crisis – some 66% of first home buyers are now familiar with its benefits. This increased understanding has led to a shift in sentiment. “The sentiment toward LMI is positive, with 77% of first home buyers likely to use it to secure their property,” says McAweeney. This growing acceptance of LMI as a viable pathway to homeownership reflects a broader change in the way Australians approach a property purchase, prioritising market entry over traditional savings methods.

Redefining parental support

Beyond the ‘big smoke’

As property prices in Sydney and Melbourne continue to soar, homebuyers are casting their nets wider. The report highlights that 40% of first home buyers are considering interstate purchases due to affordability challenges. A trend towards ‘rentvesting’ – buying an investment property in a more affordable location while continuing to rent where one prefers to live – is gaining momentum. It’s a strategy that allows homebuyers to enter the market sooner and potentially benefit from capital growth in emerging areas. Even within capital cities, homebuyers are exploring

avenues such as LMI or family assistance, or to look beyond city limits, the Great Australian Dream of homeownership remains within reach – it might just look a little different than it used to.

The need to educate the market – and the broker’s role

Despite the growing awareness of LMI, there’s still a knowledge gap to bridge. Many homebuyers mistakenly believe LMI protects them rather than the lender, leading to confusion about its value. “It’s important to emphasise to homebuyers that LMI’s real advantage to them is that it allows them to enter the market sooner with a smaller deposit, rather than taking additional time to keep saving, and start building equity sooner,” McAweeney clarifies. Mortgage brokers are positioned as key educators in this space, equipped with tools like Helia’s Deposit Comparison Estimator to help buyers weigh their options. This tool offers a snapshot of future value and projections to help assess the buyer’s finances and make informed decisions. The changing face of homebuying in Australia has elevated the role of mortgage brokers. They’re no longer just facilitators of loans but crucial advisers for borrowers navigating the complex terrain of modern homeownership. The Helia report shows that 91% of first home buyers plan to use a mortgage broker, citing expertise, time savings and access to better deals as primary reasons. “Mortgage brokers play a vital role in educating clients about the benefits of LMI as a viable alternative to traditional savings strategies,” McAweeney states. “By not offering LMI as an option, mortgage brokers risk missing clients who might have otherwise been able to afford a mortgage with a smaller deposit and LMI.” Peter Kennedy, mortgage broker and director of Peter Kennedy Consulting in Melbourne, comes across confusion about LMI among prospective homebuyers all the time. “[Homebuyers] often don’t fully understand how LMI can benefit them,” he says. Kennedy points out that one of the most common misunderstandings is about who LMI actually protects. “The common misconception is that LMI protects homebuyers instead of the lender,” he explains. “Many view LMI as an additional cost, not realising it enables them to buy a home sooner with a smaller deposit, as it bypasses the need for a full 20% deposit.”

This misunderstanding can lead to homebuyers overlooking the potential benefits of LMI in their journey to homeownership. Kennedy emphasises the importance of helping homebuyers understand the true value of LMI, especially in challenging property markets. “I aim to help homebuyers understand the value of LMI. With steep property prices, LMI allows buyers to secure a home with a smaller deposit, making it essential for those struggling to save a traditional 20% deposit,” Kennedy says. Despite the hurdles, there is a palpable sense of determination and urgency among prospective homebuyers. Over three quarters of buyers believe now is the right time to purchase a property, despite high mortgage rates and rising prices. Waiting for the perfect conditions might mean missing the boat altogether. For those willing to explore alternative

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

Resources

News

Specialty

Best in Mortgage

Mortgage Industry

Share of all houses sold that earner could afford

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources