It’s now just over one month from the commencement of the Australian Government’s First Home Loan Deposit Scheme.
The National Housing Finance and Investment Corporation (NHFIC) is working steadily towards the 1 January 2020 start date. Yesterday, it announced the National Australia Bank as the first bank to join its residential mortgage lenders panel to offer guarantees under the scheme. More lenders are expected to be announced shortly.
There are a few things that it is important for the industry to understand about the scheme.
The first is that it is targeting a genuine area of need – the deposit gap that can be a yawning chasm for first home buyers. The scheme will allow first homebuyers to purchase a home with as little as five per cent deposit if they meet certain income tests and are buying a property within the price caps set for metropolitan and regional markets.
At a time of recovering house prices in larger markets but still falling construction levels, this is welcome and positive news.
The second is that the scheme is modest in scale. With up to 10,000 guarantees to be released each financial year (with a full 10,000 in the first six months of the scheme’s operation), this is less than 10 per cent of average annual first home buyer purchases. The government has made no commitment to extending the scheme if demand were to exceed supply.
At the time of writing, the third key take out is that its appeal for off-the-plan buyers may be diminished given the loan deposit guarantee is only offered at settlement, not exchange of contracts. The delivery vehicle for the guarantee is the purchaser’s lending institution, so eligible purchasers won’t know if they have secured a guarantee until they have a formal loan in place with a participating bank. If the government does not further amend the scheme, this lack of certainty is likely to deter many off-the-plan purchasers, particularly given that they may be unsure about their future eligibility if their circumstances change in the intervening period.
We’ll continue to work with the government on the implementation of the scheme in the months ahead to ensure it delivers the best outcome possible for first home buyers and the residential property sector. More information about the scheme is available online.