Australia’s white-hot property market may be in a period of historically low interest rates, but first home buyers are still being priced out of the market because of the need for a bigger deposit. The tremendous growth in the housing market has made inner city homes unaffordable for first home buyers, hence pushing them into the suburbs.

However, the rising property prices are not the only hurdles along the path of first homebuyers. Lenders are also partly to blame. According to broker Mortgage Choice, lenders might impose tougher borrowing conditions in the months to come. In fact, many buyers who once qualified for a loan are now being pushed out of the market because of stress testing.

Stress tests determine whether buyers are able to pay back their mortgages even if their life circumstances change. Even if interest rates are at a record low, lenders assume that nothing lasts forever. Since mortgages are long-term obligations, lenders have to consider what will happen to homebuyers once the rates start to increase. They need to make sure that they have the ability to repay in all types of situations.

For first homebuyers, the rising property prices might be a bad thing. However, once they get to enter the upwards-trending property market, their net value immediately goes up. For instance, Melbourne property prices have experienced five years of 15 per cent growth. On the other hand, buying into a declining market is bad for first homebuyers.

Similarly, fewer homebuyers in the market may not be beneficial for first home buyers in the short term. However, once more buyers enter the market, this could push lenders to relax their mortgage screening procedures.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan