Millennials want homes, but don’t understand basic deposit requirements

author-avatar By on October 10,2019
Millennials want homes, but don’t understand basic deposit requirements

Photo by Drobot Dean via Adobe Stock

57% of millennials have never heard of Lenders Mortgage Insurance and some don’t know it’s possible to get a home loan with less than 20% deposit.

Those are the findings from a study released by Gateway Bank and Genworth Insurance that surveyed 2,127 millennials across Australia.

The Millennial Home Ownership survey found that while the majority (94%) of millennials consider home ownership important to them, many don’t understand the basic requirements of getting a home loan.

Currently, 58% of millennials are saving up for a deposit but almost the same amount (57%) claim they have never even heard of Lenders Mortgage Insurance (LMI).

Of those who had heard of LMI, nearly a quarter (23%) were unaware that LMI would allow them to buy a home with less than a 20% deposit.

Low levels of awareness may be the reason why almost a third (31%) of respondents don’t think they would qualify for a mortgage and why a majority (58%) believe they can’t afford the deposit yet.

Interestingly, 36% of those who were aware of LMI didn’t know this could be built into their home loan and paid as part of their regular mortgage repayments.

Genworth CEO and Managing Director, Georgette Nicholas said it’s important to make sure millennials are aware of all the options available to them, and that they don’t necessarily need to delay buying a home for a decade to save the elusive 20%.

“We understand the challenges millennials face in saving the 20% deposit typically required by lenders. For more than 50 years we have been working with our lenders to help young Australians secure a home loan sooner, with less than a 20% deposit, thereby enabling them to save on rent and achieve their dream of home ownership,” Mr Nicholas said.

It follows research from property analyst CoreLogic which also found an alarming number of Australians were unaware that banks can lend without a 20% deposit.

Despite this, the number of loans to first home buyers has risen by 5.2%, marking the strongest rise this year, according to data released by the Australian Bureau of Statistics (ABS) today.

Compared to the same time last year, the number of first home buyer loans is up 8%.

Falling interest rates on savings accounts making it harder to maximise deposit savings

Not being able to save for a house deposit remains the top barrier to home ownership and plummeting interest rates on savings accounts aren’t helping.

ING recently cut the maximum interest rate on its Savings Maximiser account made popular by the Barefoot Investor by 25 basis points to 1.95% p.a.

Prior to June’s cash rate cut, ING had one of the highest interest rates on savings accounts in the market, at 2.80% p.a.

With a rate of 2.80% p.a., you would have accumulated over $4,000 in interest (if you deposited $1,000 a month for five years). In comparison, with an interest rate of 1.95% p.a., you would only earn just over $2,000 in interest if you deposited the same amount.

Lexi Airey, CEO at Gateway Bank said while economic and market conditions have made it harder to enter the property market, it’s still achievable.

“Those in the position to get a helping hand from their relatives might want to consider a Family Pledge home loan, which can accelerate their journey to owning a home,” Ms Airey said.

“Additionally, first home buyers should look into the government’s First Home Owners Grant initiative and check to see if they’re available for stamp duty concessions.”

While savings account interest rates are falling, so are the interest rates on home loans – which is good news for everyone with a variable home loan.

The table below displays some of the sharpest variable home loan rates has found on offer across the big four banks, the top 10 customer-owned institutions and the larger non-banks:

Ad rate
Comp rate*

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 16 January 2020. View disclaimer.


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states.

In the interests of full disclosure, and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*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.

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Emma joined as a Finance Journalist in 2019. She is a journalist with more than five years experience across print, broadcast and digital media, with previous stints at Style Magazines, RACQ, and as editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of young women and millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand. When she's not writing about finance she's watching Greys Anatomy (again).


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