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The recent rate hikes over the past year seemed to have made it more difficult for many renters to enter the housing market as they face financial pressures and stress far greater than homeowners.

New research from RFI Global and DBM Atlas found that renters are also facing considerable financial burden amid the rate hike, particularly in terms of saving for a future home.

Savings stress on renters

Compared to homeowners, savings stress is more than triple among renters.

For context, the study revealed that the average owner-occupier mortgage customer has banked close to $19,000 more in their deposit accounts since the onset of the COVID-19 pandemic. This was close to four times the incremental amount banked by renters, who saved closer to $5,000.

While interest rate increases do not impact renters as directly as mortgage holders, the hikes still had an indirect effect in the form of added rental costs as landlords pass on the increased home loan costs. On top of this, renters are also reeling from the impacts of rising cost of living pressures.

In fact, data from RFI Global showed that for 75% of non-mortgage holders in Australia, the primary concern is inflation. Around 62% said they also consider the increasing cost of housing as a major concern.

Meanwhile, concerns about the cash rate have mounted, as 42% of non-mortgage holders in March 2023 tagged the trend as a major hurdle.

Given these factors, the findings on savings highlight the fact that the renting segment is facing financial stress due to lower savings buffer.

Capacity of renters to enter homeownership

Australians seemed to be taking out their first home loan later in life, with the median age of consumers saving for a deposit declining over time. This means that it takes them longer to save for a deposit.

Between March 2020 and August 2022, the proportion of savers under 25 who reported house deposit as their primary savings goal almost doubled, from 18% up to 30%.

The trend, however, seemed to have reversed early in 2023, with a significant decline in saving for a deposit among those under 35.

The study said there is a general sentiment among prospective buyers that affordability is slipping away as barriers to entry heighten.

For some, however, there is a renewed opportunity to use their disposable income on activities that were not available during the pandemic like travel, social activities, and events.

According to the study, the challenges of entering the property market comes in many forms, all of which are interconnected.

Around a quarter of savers indicate that affording the property in the first place is the biggest problem. Roughly the same share of savers said saving for a deposit is a main concern. High interest rates are also a major concern for a fifth of savers.

How lenders can help

First-home buyers are more likely to turn to a broker first when exploring their options, which means that lenders might be missing an opportunity to maintain a position of trust among prospective homeowners.

The study said the challenges to housing market entry can be addressed by lenders in ways such as lowering the minimum deposit requirement, providing information on government grants, and offering guidance to customers through the homebuying process.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

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LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
 Featured Online ExclusiveUp to $4k cashback
  • Immediate cashback upon settlement
  • $2000 for loans up to $700,000
  • $4000 for loans over $700,000
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
$2,434
Principal & Interest
Variable
$0
$250
60%
  • Find out your loan eligibility in 2 minutes or less
  • Complete your application in less than 20 minutes
  • Low fees and fast approval times
5.95% p.a.
5.95% p.a.
$2,385
Principal & Interest
Variable
$0
$0
90%
5.94% p.a.
5.95% p.a.
$2,383
Principal & Interest
Variable
$0
$0
90%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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Photo by AndreyPopov on Canva.

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