Higher deposits, stretched LVRs & more borrowers needing mortgage insurance
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Higher deposits, stretched LVRs & more borrowers needing mortgage insurance

New report shows the challenges involved in buying a home are getting tougher

By Bronwyn Allen
Thu, Nov 30, 2023 10:35amGrey Clock 2 min

The amount of money required for a home deposit is rising and more than half of home buyers had to pay lenders’ mortgage insurance in FY23, according to a new report released by PEXA.

NSW recorded the highest median deposit in FY23 at just below $120,000, up 3.9 percent on FY22. In Victoria, the median deposit was $84,723, down 0.5 percent, and in Queensland it was $78,143, up 8.5 percent.

The time it takes to save these deposits is on the rise. Based on the median family income in each state and a 15 percent savings rate, PEXA found NSW buyers now need an average of almost eight years to save their deposit. This is up a whopping 83 percent since 2020. It takes Victorian buyers a little over five years to save their deposit, up 64 percent since 2020. It takes Queensland buyers just under five years, up 37 percent over two years.

Average deposit-to-value ratios (DVRs) increased to about 20 percent across the three major eastern states as a result of lenders tightening their credit criteria in FY23. The DVR is the amount of cash a buyer contributes to a purchase. The average DVRs in FY23 were 20.4percent in NSW, up 1 percent on FY22; 19.5 percent in Victoria, up 0.8 percent and 19.8percent in Queensland, up 1.5 percent.

The PEXA data shows most borrowers are taking out the maximum possible LVR (loan to value ratio) to fund their purchases. The average LVRs among borrowers in FY23 were 79.6 percent in NSW, 80.5 percent in Victoria and 80.2 percent in Queensland. The research shows the major banks averaged higher LVRs, suggesting they are more open to lower deposit borrowers, due to their visibility of borrower’s income and expenditure via existing banking relationshipsThis also meant more major bank customers had to pay lenders’ mortgage insurance (LMI).

Most lenders will not lend more than 80 percent of a property’s value without forcing the borrower to pay LMI. This insurance protects the bank from default and can be very expensive. Over half of new borrowers had to pay LMI in FY23. The rate was highest in Victoria, where 56.5 percent of new borrowers had to take out LMI.

The PEXA report said rising property prices meant buyers needed higher deposits, making it tougher to buy a home and making the “generational wealth gap more apparent”.

As a result, younger buyers are increasingly tapping the Bank of Mum and Dad to help them achieve the required deposit, as well as taking advantage of government support through various programs.



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Appliance technicians blame a push toward computerisation and an increase in the quantity of components inside a machine

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Our refrigerators, washing machines and ovens can do more than ever, from producing symmetrical ice cubes to remotely preheating on your commute home. The downside to all these snazzy features is that the appliances are more prone to breaking.

Appliance technicians and others in the industry say there has been an increase in items in need of repair. Yelp users, for example, requested 58% more quotes from thousands of appliance repair businesses last month than they did in January 2022.

Those in the industry blame a push toward computerisation, an increase in the quantity of individual components and flimsier materials for undercutting reliability. They say even higher-end items aren’t as durable.

American households spent 43% more on home appliances in 2023 than they did in 2013, rising from an inflation-adjusted average of $390 to $558, according to Euromonitor International. Prices for the category declined 12% from the beginning of 2013 through the end of 2023, according to the Labor Department.

One reason for the discrepancy between spending and prices is a higher rate of replacement, say consumers, repair technicians and others. That’s left some people wishing they had held on to their clunky ’90s-era appliances and others bargaining with repair workers over intractable ice makers and dryers that run cold.

“We’re making things more complicated, they’re harder to fix and more expensive to fix,” says Aaron Gianni, the founder of do-it-yourself home-repair app Plunjr.

Horror stories

Sharon J. Swan spent nearly $7,000 on a Bosch gas range and smart refrigerator. She thought the appliances would last at least through whenever she decided to sell her Alexandria, Va., home and impress would-be buyers.

That was before the oven caught fire the first time she tried the broiler, leading to a 911 call and hasty return. The ice-maker in the refrigerator, meanwhile, is now broken for the third time in under two years. Bosch covered the first two fridge fixes, but she says she’s on her own for the latest repair, totalling $250, plus parts.

“I feel like I wasted my money,” says the 65-year-old consultant for trade associations.

A Bosch spokeswoman said in an emailed statement that the company has been responsive to Swan’s concerns and will continue to work with her to resolve ongoing issues. “Bosch appliances are designed and manufactured to meet the highest quality standards, and they are built to last,” she said.

Kevin and Kellene Dinino wish they had held on to their white dishwasher from the ’90s that was still working great.

The sleeker $800 GE stainless steel interior dishwasher they purchased sprang a hidden leak within three years, causing more than $35,000 worth of damage to their San Diego kitchen.

Home insurance covered the claim, which included replacing the hardwood down to the subfloor and all their bottom cabinetry, but kicked the Dininos off their policy. The family also went without access to their kitchen for months.

“This was a $60 pump that was broken. What the hell happened?” says Kevin, 45, who runs a financial public-relations firm.

A GE Appliances spokeswoman said the company takes appliance issues seriously and works quickly to resolve them with consumers.

Increased complexity

Peel back the plastic on a modern refrigerator or washing machine and you’ll see a smattering of sensors and switches that its 10-year-old counterpart lacks. These extra components help ensure the appliance is using only the energy and water it needs for the job at hand, technicians say. With more parts, however, more tends to go wrong more quickly, they say.

Mansoor Soomro, a professor at Teesside University, a technical college in Middlesbrough, England, says home appliances are breaking down more often. He says that manufacturers used to rely mostly on straightforward mechanical parts (think an on/off switch that triggers a single lever). In the past decade or so, they’ve transitioned to relying more on sophisticated electrical and computerised parts (say, a touch screen that displays a dozen different sensor-controlled wash options).

When a complicated machine fails, technicians say they have a much harder time figuring out what went wrong. Even if the technician does diagnose the problem, consumers are often left with repairs that exceed half the cost of replacement, rendering the machine totalled.

“In the majority of cases, I would say buying a new one makes more economic sense than repairing it,” says Soomro, who spent seven years working at Siemens , including in the home-appliances division.

These machines are also now more likely to be made with plastic and aluminium rather than steel, Soomro says. High-efficiency motors and compressors, too, are likely to be lighter-duty, since they’re tasked with drawing less energy .

A spokeswoman for the Association for Home Appliance Manufacturers says the industry has “enhanced the safety, energy efficiency, capacity and performance of appliances while adding features and maintaining affordability and durability for purchasers.” She says data last updated in 2019 shows that the average life of an appliance has “not substantially shifted over the past two decades.”

When simpler is better

Kathryn Ryan and Kevin Sullivan needed a new sensor to fix their recently purchased $1,566 GE Unitized Spacemaker washer-dryer. GE wasn’t able to fix the sensor for months, so the couple paid a local technician $300 to get the machine working.

The repairman also offered them a suggestion: Avoid the sensor option and stick to timed dries.

“You should be able to use whatever function you please on a brand new appliance, ideally,” says Sullivan, a 32-year-old musician in Burbank, Calif.

More features might seem glamorous, Frontdoor virtual appliance tech Jim Zaccone says, but fewer is usually better.

“Consumers are wising up to the failures that are happening and going, ‘Do I really need my oven to preheat while I’m at the grocery store?’” jokes Zaccone, who has been in the appliance-repair business for 21 years.

He just replaced his own dishwasher and says he bought one with “the least bells and whistles.” He also opted for a mass-market brand with cheap and readily available parts. Most surprisingly, he chose a bottom-of-the-line model.

“Spending a lot of money on something doesn’t guarantee you more reliability,” says Zaccone.

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