Property deposits becoming more expensive

  • June 27, 2013
  • Darrin Leung
  • Investment

For many young people one of their first major saving goals is a deposit on their home. Obviously one of the major factors that influences the size of the deposit needed is the total amount of the property you are going to buy.

Most lenders need around 5-6% of the total cost as a deposit though there is a wide variation. The reality is that the bigger the deposit you have the better  as it will reduce mortgage payments, help get you lower interest rates, mean you pay no mortgage insurance fees, decrease the risk when selling and give you a better buffer if there is another financial crisis. Most analysts suggest a minimum of 10% with a 20% deposit being ideal.

The problem is that as property prices go up the amount you need for a deposit increases, making it progressively harder for people to get their first foot on the property ladder.

The median price of a house in Australia has grown to $544,071, which has increased the amount need for a  10% deposit by $1,430 and $2860 for a 20% deposit. Similarly the average cost of a unit rose to $413,179, adding a further $810 to the standard deposit and $1620 to the recommend.