First home buyers appear to be suffering from FOMO (fear of missing out) after the latest monthly Corelogic house price results.
Both Melbourne and Sydney house prices went up 1.7% in September 2019, meaning they've gone up around 3% over the past two months. That's a decent chunk of the property decline recovered in just a couple of months.
Management at Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) may sleep a little easier knowing that the property price declines have stopped.
The Reserve Bank of Australia (RBA) rate cuts and the APRA lending buffer change has seemingly flipped people's opinion on the direction of property. So it's not surprising to see that house prices are rebounding as nervous potential first home buyers try to buy whilst prices are still lower than the previous peak.
It's certainly true that house prices are a little more affordable with interest rates lower than before because it equates to a lower monthly repayment.
But I'd urge potential buyers not to get too carried away in FOMO. Everyone should still aim to have a 20% deposit – anything less than that could mean fewer lender options, a higher interest rate and more upfront fees.
Don't forget that whatever you borrow needs to be paid off over the next two or three decades. You'll be paying real money out of your bank account until it's all paid off. There's nothing wrong with saving for a little longer to reach that 20% deposit.
There's also a chance that interest rates could rise again in the next few years if market participants suddenly feel that countries, businesses and individuals are a little less likely to pay back the lenders. Inflation is not guaranteed to stay this low forever.
Foolish takeaway
If you and your finances are ready to buy a house then you need to do what's right for you. But there's no need to rush into buying a property if you're not quite ready yet.
