‘Stepping stone’ buying on the rise – is FOMO to blame?

The latest Mortgage Choice Home Loan Report revealed a striking shift in how different generations approach homeownership, with younger buyers increasingly viewing their first property as a strategic investment rather than a forever home.

According to the findings, 54% of Millennial mortgage holders saw their first purchase as a ‘stepping stone’ and just 31% thought of their first purchase as a ‘forever home’.

A mere 17% of Gen Z respondents thought of their first purchase as a forever home, with 47% seeing it as a stepping stone onto the property ladder.

Baby Boomers, meanwhile, predominantly saw their first purchase as a forever home (41%), with just 35% seeing it as a stepping stone.

Belieing the stereotype of greedy Boomers undercutting first-home buyers at weekend auctions, younger generations were actually more likely to see their first purchase as either a ‘fixer upper’ or an investment property.

'When you bought your first property, did you think of it as...' – Credit: Mortgage Choice

“Baby Boomers (are) saying they bought their first home with the intention of staying put for life, while Gen Z buyers see property as an investment in their future and are focused on getting a foot on the property ladder,” Anthony Waldron (pictured), chief executive of Mortgage Choice, said.

A third of Gen Z buyers cited property as a strong investment strategy, and 30% of all buyers admitted that the fear of missing (FOMO) was a major motivation for buying property.

However, the strategy doesn’t always work out. More than half of borrowers (57%) wish they’d done more homework when choosing their first home loan, while nearly two-thirds (62%) of borrowers said they felt there might have been a better home loan option for them.

The most common mistakes borrowers made when choosing their first home loan were: 

• Assuming all home loans are basically the same (18%)

• Focusing too much on rate (18%)

• Failing to consider how their needs might change in the future (18%)

• Opting for major lenders without considering other options (16%)

• Assuming home loan pre-approval guarantees final approval (13%)

The findings underscore the importance of working with experts.

Broker expertise essential for avoiding investment property mistakes

“Mortgage brokers can help first-time buyers compare their home loan options, including rates, features and structures, from a range of lenders so they can feel confident that they’re making the right choice,” Waldron said.

“Our survey also highlights that when it comes to choosing the right property and home loan, research and preparation make all the difference,” added Waldron. “Survey respondents who suffer from buyer’s remorse told us they failed to adequately plan and research before purchasing their first property."

The quarterly Mortgage Choice Home Loan Report draws on home loan submission data from Mortgage  Choice and a nationally representative survey of 1,000 consumers.

Among other findings in the report, investment loan demand surged by 26% year on year in the June quarter, while the average home loan size jumped nearly 8%.