The First Home Loan Deposit Scheme legislation passed the Senate yesterday, giving the National Housing Finance and Investment Corporation (NHFIC) confirmation that the program will be going ahead with full funding. Beginning January 1, 2020, some first home buyers will be able to buy a new home with only a 5% deposit, as the government will provide them with the remainder of the 20% needed.
The bill, which was only introduced one month ago, also includes legislation to establish a new housing research function within the NHFIC, supported by $25 million in funding, to investigate housing demand, supply and affordability.
If you’re confused, cast your mind back to budget week. You may recall the government vowing to make buying homes easier for first home buyers in response to the fact that saving up the 20% deposit is one of the greatest barriers to home ownership. The First Home Loan Deposit Scheme will let an eligible first home buyer purchase a house with a 5% deposit. The government will provide a loan guarantee of up to 15% of the property’s value, thereby allowing the first home buyer to have the full 20% deposit required.
Of course, there are some regulations about who is eligible. At the time of writing, individuals earning up to $125,000, or couples earning up to $200,000, per year, will be eligible for the scheme — so roughly 10,000 people per year. Further details about eligibility have yet to be revealed, but the the NHFIC will be determining these, along with:
This is great news for first home buyers, as not only does it allow them to buy a home sooner, but it also gives them the guarantee they need so they don’t have to shell out for mortgage insurance.
Housing Industry Association (HIA) managing director, Graham Wolfe said, “HIA has long argued that there needs to be a national approach to helping first home buyers (FHB) enter the market and to address the time that saving a deposit now takes.
“Along with stamp duty and securing finance, the time it takes to save a home deposit remains one of the main barriers to people’s home ownership aspiration.” According to Wolfe, helping 10,000 first home buyers a year achieve home ownership will take “some of this pressure off” the current market. HIA expects the scheme to “make a real difference,” estimating it could save an average first home buyer with less than 20% deposit tens of thousands of dollars over the life of their loan.
“Independent research shows that half of all renters believe they will never afford to buy a home, even though over 90% of renters would like to. [Fortunately,] renters will also benefit from the Scheme as more new houses and more home owners mean more supply and less pressure on rental prices,” said Wolfe.
“It is widely accepted that long term, secure and stable housing tenure helps people achieve many of their life goals. Home ownership matters to the wellbeing of the economy and the community.
“HIA will continue to work with the government to see the Scheme rolled out from 1 January 2020,” the managing director concluded.
This deposit scheme should provide a boost in the property industry, with 10,000 more buyers a year buying homes throughout the country.