The lender’s survey, based on a representative sample of 1,000 property buyers surveyed in March 2018, revealed that 22 per cent of Australians exceeded their budget when purchasing a home.
Of the respondents who went overbudget, 10 per cent spent more than $150,000 than they were intending, 30 per cent went over by $50,000, and nearly half (46 per cent) did so by more than $30,000.
Home buyers in Sydney were most likely to exceed their spending limit (27 per cent), followed by home buyers in Melbourne (22 per cent).
Looking at the results on a state-by-state level, however, home buyers in Queensland were most likely to break the budget (26 per cent), followed by NSW (22 per cent) and Victoria (20 per cent).
According to ME, the most common reason for exceeding the budget was “falling in love” with the home in question (52 per cent).
This was followed by “underestimating the budget required” (28 per cent), “impatience” (20 per cent), “underquoting by an agent” (15 per cent) and “getting caught up in a bidding war” (12 per cent).
Further, 64 per cent of respondents who exceeded their budget noted that they were negatively impacted as a result, with 28 per cent claiming that it affected other financial goals, 27 per cent stating they had to adjust spending behaviour and 24 per cent noting they experienced emotional stress as a consequence.
ME also asked respondents what factors influenced the determination of their personal spending limit, with the most common factors being the minimisation of debt (55 per cent), other financial commitments (52 per cent), borrowing limits (46 per cent) and their estimation of the market price (45 per cent).
Home buyers that remained within budget were also asked about their behaviours.
Almost three-quarters (74 per cent) attributed their success to “patience”, followed by “avoiding auctions” (27 per cent), “buying a home in an alternative location” (21 per cent) and “adjusting property expectations” (13 per cent).
ME’s head of home loans, Patrick Nolan, commented: “When it comes to spending within your means, there are two points during the home buying process where you need to get it right.
“The first is when you calculate what you can borrow and while your bank is legally obligated to only lend an amount you can afford to repay over the life of the loan, including at a higher interest rate, it’s your responsibility to ensure the information you provide them, particularly your expenses, is accurate so they can make an accurate long-term assessment.
“The second point is at the moment of purchase where it’s the responsibility of the buyers to remain within their set spending limit, particularly if that limit is based on the maximum amount that can be borrowed from the bank.”
He suggested that some strategies that could help home buyers stay within budget.
Mr Nolan advised: “Stay patient — there will always be another property.
“Keep your feelings in check, and if you can’t, remove yourself from the situation by organising someone else to do the purchasing for you, either a family member or friend or even a professional buyer.
“Change your buying criteria, including size, location or style of property.”
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.