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The Albanese government’s plan to allow an unlimited number of first home buyers to access 5 per cent deposits on homes will now commence from 1 October, three months earlier than originally planned.
Announced in April, the expansion of the Home Guarantee Scheme means first home buyers are also exempt from paying lenders mortgage insurance (LMI).
This will be available to all first home buyers; there are no caps on income limits and property price caps will be set higher in line with average house prices.
For example, the current price cap in Sydney was $900,000. The updated price cap from 1 October will be $1.5 million.
For the rest of NSW, the current cap is $750,000. The new cap will be $800,000.
A full breakdown of the price caps for each area of the country is available on the Housing Australia website.
The government expects this scheme to cut years off of the time needed to save for a deposit and will save first home buyers tens of thousands of dollars on LMI.
Estimates claim first home buyers will save around $1.5 billion in mortgage insurance costs in the first year.
“It’s just not right that an entire generation of young Australians have been locked out of the housing market – saving for decades while paying off someone else’s mortgage. So Labor’s changing it,” Minister for Housing Clare O’Neil said.
In the latest episode of Broker Daily Uncut, Phil Tarrant expressed concerns over a lack of clarity surrounding the scheme.
He said he’d like to know how the government is guaranteeing it. This includes whether lenders are subscribed into the scheme and what the ramifications for lenders mortgage insurance (LMI) providers are.
He said if he was an LMI provider he'd be "livid" and seeking compensation from the government.
Industry reacts
Industry heads reacted to the updated policy. Flint Group’s CEO, Christian Stevens, welcomed the changes but believes it will spark increased competition, pushing prices up.
He urged brokers to be aware and alert to policy movements to better support clients.
“For brokers, this presents a strong opportunity to support more clients into home ownership while helping them navigate a more competitive market,” Stevens said.
The spring season was already tipped to be a busy time for purchasing. According to Home Loan Experts mortgage broker Prakash Rai, the 5 per cent deposit will introduce a new segment of borrower: those on good incomes that were saving for a deposit.
Housing Industry Association managing director Jocelyn Martin said removing the 50,000 places cap on the scheme will unlock opportunity for far more young people looking to enter the property market.
She said the scheme has already helped over 210,000 people purchase property and expects the expansion to help mitigate the hardest part of purchasing a property – saving for a deposit.
“Recent analysis of the scheme shows that more than one-third of all guarantees were issued to buyers in regional areas. It also showed an increasing proportion of younger buyers participated in the scheme each year since its inception, highlighting its importance to a broad range of Australians,” Martin said.
With this in mind, the Regional First Home Buyer Guarantee will be replaced by the First Home Guarantee from 1 October.
Property Council of Australia CEO Mike Zorbas said with the average age of a first home buyer in the capital cities approaching 40, “every available lever” must be pulled to get more young people into home ownership.
“Maintaining confidence in the key consumer segments of the domestic economy has become significantly more important in the current period of global uncertainty,” Zorbas said.
[Related: Labor to provide 5% deposits for first home buyers]
