Bank of Melbourne brings first home dream closer
27 July 2020
With a third of Victorians more motivated to save for a home because of COVID-19, a new home loan option from Bank of Melbourne may now hold the key to home ownership dreams.
Awarded the Canstar Bank of the Year for First Home Buyers 2020, Bank of Melbourne is helping first home buyers get a foot in the door sooner. Effective Monday 27 July 2020, Bank of Melbourne has reduced Lenders Mortgage Insurance (LMI) to $1.00 for eligible first home buyers with a Loan to Value Ratio (LVR) up to 85%.
The move paves the way for first home buyers to buy their first home by saving a 15% deposit, instead of the traditional 20% of the value of a property purchase price.
Saving for a deposit is one of the biggest barriers to home ownership for first home buyers, with Bank of Melbourne research revealing it takes an average of almost nine years for customers to save for a deposit for their first home.
Generally, a home valued at $600,000 means a buyer would also be looking at a one-off payment of more than $6,000 for the cost of LMI if they had a 16% deposit.
The Bank of Melbourne 2020 Home Buying Report found that almost 40% of Victorians are worried about not being able to afford their first home in the area they want, and more than a third find it difficult to build up a deposit. To help boost their savings for a deposit, 20% of Victorians have moved back in with their parents to reduce expenses, and more than a quarter are working overtime to bolster their income.
Bank of Melbourne Chief Executive, Mark Melvin, said “Our research shows one of the biggest hurdles for first home buyers to overcome is saving for a deposit, even if they’re in a financial position to make home loan repayments.
“That means moving back home with parents, moving in with friends or into a share house, working overtime or having a side hustle, or asking the bank of mum and dad to help top up savings.
“By reducing the expense of Lenders Mortgage Insurance, first time purchasers may be able to save thousands and buy a property that meets their needs sooner.”
Bank of Melbourne research showed one in every 10 Australians in the property market are first home buyers, and the COVID-19 pandemic has made one third of Australians want to save for that goal quicker. First home buyer activity has remained relatively stable in Victoria in comparison to upgraders and investors, with new loans to first home buyers increasing as a proportion of owner occupier loans to 36% in the 3 months to May 2020.*
“We’ve all been spending more time at home during the COVID-19 restrictions, and people are re-thinking what they want from their home and neighbourhood. For 70% of Victorians, being cooped up during the restrictions has led them to prefer a house rather than an apartment – with features like a backyard, bigger kitchen, garage and a separate study becoming more important,” Mr Melvin said.
“With a combination of a record low interest rate environment, the exemption or concession on stamp duty for eligible first home buyers in Victoria, and Bank of Melbourne’s First Home Buyer offer, the goal of a dream first home could be one step closer for Victorians looking for a home that fits their new lifestyle.”
The Bank of Melbourne First Home Buyer home loan offer in detail
The Bank of Melbourne First Home Buyer home loan offer1 means eligible customers can put forward a minimum deposit of 15% of the value of the property (LVR2 up to 85% at the time of approval) and Bank of Melbourne will reduce the cost of Lenders Mortgage Insurance to just $1.00 – which can save thousands. The offer is available for owner occupier first home loans on principal and interest repayments, with a maximum loan size of $850,000 (up to a maximum property value of $1,000,000).