A government plan lets buyers acquire with a smaller deposit – but even that amount is growing
A new tranche of government-guaranteed home loans was released this week – but government home-buying stimulus is becoming less effective as house prices continue to boom.
The government’s First Home Loan Deposit Scheme was launched in January 2020, well before inflation spiked. Now, however, house-price increases are eating into home buyer assistance plans, according to a report by The Australian.
Mostly used by buyers under 30, the government-guaranteed home loans allow the purchase of a property with as little as a 5% deposit and without the need to take out mortgage insurance. The government guarantees the difference between the buyer’s deposit and the 20% deposit threshold required by lenders.
Mortgage brokers working in the scheme told The Australian that applicants usually have a deposit of around 10%, with the government guaranteeing the rest.
But applicants using the scheme will now need to save up to a quarter more than they did a year ago, The Australian reported. In Sydney, a 10% deposit is now about $110,000 after house prices spiked to a median of $1.1 million.
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“House prices have certainly gone up, but we are also hoping that people have saved more during the lockdowns – the statistics would suggest this is the case,” Michael Baumann, executive general manager of home buying at Commonwealth Bank, told The Australian.
CBA, National Australia Bank and Bendigo Bank are on a panel of lenders administering the scheme.
Regional variations in house prices have also thrown a spanner into the works for some; an applicant in Perth, where the median home value is $531,000, can get a much better deal from the scheme than one in a higher-priced city.
A report on the effectiveness of the scheme last year found that home buyers who took advantage of the guarantees were able to move their home-purchase plans forward by an average of four years, The Australian reported.
The problem with the plan – and a range of related government assistance plans – is that house prices continue their relentless upward march. House prices nationally have increased by 22.4% over the past 12 months, according to CoreLogic data.
