High pressure auctions often mean buyers are spending all their savings on their new homes. Picture Thomas Lisson
First-home buyers are throwing every single dollar to their name into their purchases, with experts warning their $0 in leftover savings is a gamble that’s fuelling growing risks for the housing market.
A Finder report revealed almost half of first-home buyers polled nationally went above their budget, up from 38 per cent in 2022, as soaring prices put pressure on them to spend more.
A rising number of those who overspent said they blew all their savings on their properties.
First-home buyers in this category accounted for about half of those who went over their intended budgets in the past year, according to the Finder research.
Finder noted the primary driver of the trend was rapid home price rises, which meant the budgets that first-home buyers had at the start of their home buying journey were quickly becoming too small.
Sydney house prices climbed an average of $121,000 over the year to December, while unit prices increased by an average of about $52,000, PropTrack figures showed.
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Buyer demand heavily outweighs supply. Picture Thomas Lisson
It’s created a situation where home buyers are being prompted to throw more of their savings into their purchases to keep up with the extreme rises in prices or risk being locked out of the market.
Finder home loans expert Richard Whitten said it was a dangerous position for first-home buyers to be in.
“Buying a property without any savings left over means you’ll face a lean couple of years as you make your repayments and try to put a bit extra aside,” he said.
“Emergency expenses can hit us all at any time, and a buyer in this position will be unprepared.”
Mr Whitten added that a glut of first-home buyers with zero savings could be problematic for the wider market in an environment where interest rate hikes are no longer off the table.
“If interest rates rise in 2026, which is a possibility, a buyer with no savings will struggle to save even more as their repayments increase further,” he said.
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Three of the big four banks now say we are at the end of the rate cutting cycle. Picture: NCA Newswire
This week ANZ joined NAB and CBA in revising earlier forecasts of more interest rate cuts in 2026, saying it expected no further cuts to come in the foreseeable future.
Half the 28 economists surveyed in a monthly Finder consumer sentiment survey agreed, saying they expected no more cuts. A third said a hike in rates was a prospect in the next six months.
Geoffrey Kingston at the Macquarie University Business School said the Reserve Bank would likely “sit on its hands” at its next board meeting on Tuesday but added “we will probably see one or two rises in the cash rate” over 2026.
My Housing Market economist Andrew Wilson said the RBA “may have some difficult decisions in 2026 if inflation keeps rising as expected and the recent modest weakening of the labour market intensifies”.
Sydney couple Jitin and Anupama Vyas said there were in a comfortable position now but did feel pressure to spend more when they were seeking a home.
“When you are looking for a property in Sydney, you don’t really like anything because what you do like, you can’t own because it’s beyond your reach,” Mr Vyas said. “We managed to get something we liked in Cherrybrook, so we wanted to do it even if it was a stretch.”
They were contacted by their mortgage broker after six months in their new home, when Mr Vyas said they were feeling “stretched” by their mortgage.
“After the mortgage, there were a few rate cuts, but they were not helping much,” he said. “Anything, even a $100 drop would help us.”
Jitin Vyas pictured at his home in Cherrybrook with wife Anupama and children Dhriti and Avyukt. Picture: Monique Harmer
Mortgage Choice broker Terence Hammond helped them refinance their loan and said it was “good practice” for homeowners to review their loan every six to 12 months.
“It’s also worth reviewing whenever your circumstances change, be it financial or product related,” he said. “Don’t expect your bank to call you out of the blue and offer you a cheaper rate.”
– With additional reporting by Owen Raymond
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