First homebuyer reality: ‘Rent forever’ or retire with a mortgage

Jonathon Greenwood and Olivia Maclean, in their early 30s, have just bought their first home with a five per cent deposit – a two bedroom townhouse in Cairns, but they fear they may struggle to pay off the mortgage before retiremend. Picture: Brendan Radke.

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Coming from Melbourne, Olivia Maclean though she would be renting her whole life.

Even when she moved to Queensland’s tropical north, the dream of buying a home seemed out of reach.

Fastforward four years, Olivia and her partner, Jonathon Greenwood, can proudly call themselves first homebuyers — but the realisation they may be paying a mortgage into retirement is not lost on them.

The pair, in their early 30s, have just bought a two-bedroom townhouse near the beach in Yorkeys Knob for $530,000 with a 5 per cent deposit on a 30-year variable loan and a 5.69 per cent interest rate.

The beach at Yorkeys Knob, a suburb in Cairns in far north Queensland.

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Jonathon Greenwood and Olivia Maclean, pictured with their dog Koah, have bought their first home, a two bedroom townhouse in Cairns, in their early 30s. They fear if interest rates go up higher, they may struggle to pay off their home before reaching retirement age. Picture: Brendan Radke.

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It comes as figures from Westpac show at least one in five first homebuyer loans issued over the past 12 months were to buyers over the age of 40, meaning repayments on a standard 30-year loan would stretch well into retirement age.

Westpac says the average first homebuyer age has jumped by two years over the past five years to 34, but data from broker networks puts the average age as high as 37.

Ms Maclean and Mr Greenwood nearly didn’t get the finance for their purchase because Mr Greenwood’s notice of tax assessment failed to come through in time, but luckily, the owners wanted a long settlement.

This two-bedroom townhouse in Yorkeys Knob, Cairns, recently sold for $530,000.

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“That was quite stressful,” Ms Maclean said. “Other people had made higher offers for it but wanted to move in straight away and we were flexible with our settlement date. I didn’t sleep much at all!”

Ms Maclean said the couple initially wanted a three-bedroom, two-bathroom house with a yard, but that was “unattainable”.

“We were a bit disappointed, but then started looking at apartments and townhouses and realised we could make it work.”

This townhouse in Yorkeys Knob recently sold to first homebuyers for $530,000.

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On their current wages as a community nurse and kitchen technician, they can afford the monthly repayments on the loan — but haven’t looked too far into the future yet.

“We’d love to pay it off sooner,” Ms Maclean said.

“We’ve done a spreadsheet and a budget and realised we do have enough to eat, and to live, and still enjoy ourselves a little bit.

“We did have a tiny bit of a chat about once we’re a bit more comfortable we could put extra repayments into it, but we’ll see what happens — where life takes us.”

Jonathon Greenwood and Olivia Maclean in their first home in Cairns. Picture: Brendan Radke.

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Compare the Market’s economic director David Koch said the path to home ownership was changing, with loans getting bigger, repaymentslarger, and many entering the market later in life.

Mr Koch said the solution may lie in small but consistent top-ups.

“An extra $300 a month could shave five years off the life of a 30-year mortgage,” he said.

But, that’s only achievable for couples earning the national average of $104,520 each, with repayments still under a third of combined income.

“I originally came from Melbourne and I was like; ‘I’m going to be renting for the rest of my life’,” Ms Maclean said.

“I still think if I wasn’t with my partner, I wouldn’t be able to do this on my own.”