Potential homebuyers should finalise their finances before the December 31 rollback of the First Home Owners boost or risk missing out, while economists say the planned reduction will leave a temporary hole in the housing market.

Financial comparison website RateCity calculates that there are only two weekends left for first home buyers to be eligible to receive the First Home Buyers boost of $10,500 for existing homes and $14,000 for new homes.

This is because it generally takes up to 20 business days to process a home loan, RateCity chief executive Damian Smith said.

"First home buyers must have their finances formalised before the December 31 deadline and because it can take a month to process a home loan, there is really only three weeks left to secure the boost," he said in a statement.

The scheme is set to be rolled back at the end of calendar 2009 to $7000 for existing homes and $10,000 for new homes.

That rollback will contribute to a temporary dip in housing market activity, CommSec economist Savanth Sebastian and Nomura Australia chief economist Stephen Roberts said.

"There might be a last surge in housing finance commitments as we get closer to that roll-back date," Mr Roberts said on Friday.

"Once we get into the early months of 2010, we'll see rather weaker housing finance commitments and that will be driven by the fact that we're back to the standard $7,000 grant."

"Also, mortgage rates are slowly working their way higher."

The Reserve Bank of Australia has lifted the cash rate by 25 basis points at each at its past two monthly board meetings, in November and October, and the rate now sits at 3.5 per cent.

Banks quickly followed each official rate rise by lifting their own variable mortgage rates.

"That boost really supported the economy during the global financial crisis," CommSec's Mr Sebastian said.

"It really brought forward some planned sales that should have gone through next year.

"So there's no doubt that there's going to be a period of sales, particularly by first home buyers, but I think ... we should see a resumption in building approvals in the second quarter of 2010."

Official data released last week showed the number of home loans surged in September, after two straight months of decline, as first home buyers raced to beat the October 1 rollback of the first home owner grant.

Up to September 30 this year, first home buyers were eligible for a government grant of $14,000 to purchase an existing residential premises and $21,000 for a new house.

Mr Smith said despite the December rollback of the scheme, potential home owners shouldn't rush into a deal for the sake of saving a little money in the short-term.

"If you took the first loan you found that had a standard variable interest rate of 6.21 per cent per year, for example, for a $300,000 loan this would cost you about $1,972 each month," he said.

"Compared to one of the best standard variable comparison home loan rates on the market at 5.35 per cent p.a., repayments would be $1,815 per month.

"That could save you $1,884 each year or over $47,000 over the life of a 25-year loan.

"The $157 per month difference between the two loans above could save you even more over the term of the loan," he said.

"If you invested the extra $157 you saved each month by finding a better home loan deal, and used it to make bigger repayments, you could potentially reduce your loan by three years and nine months as well as save an extra $42,000."

"A home loan is a huge financial commitment and it should always have time invested into finding the best deal for you. Always read the fine print to make sure it is suitable, before signing any contract," he said.

Source: Eoin Blackwell, Sydney Morning Herald