Banks have extended the pre-approval time for first home buyers to give them a better chance of cracking into the property market. Under the Federal Government’s First Home Loan Deposit Scheme — which started in January — borrowers are allowed to stump up just a 5% deposit, but now lenders have agreed to give potential borrowers an extension on the time they need to buy a home.
The COVID-19 pandemic has caused a halt to the property market with open for house inspections wound back and many auctions delayed.
Under the scheme first-time buyers can now ask their lender for an additional 90 day extension on their pre-approval duration, effectively giving them double the time to buy a house.
Pre-approval is when the lender has agreed to lend a borrower money but hasn’t proceeded to full or final approval.
But the National Housing Finance and Investment Corporation’s chief executive officer Nathan Dal Bon said borrowers still have to meet the NHFIC and the bank’s eligibility criteria to be approved under the scheme.
“The option to extend the 90 day pre-approval period gives both scheme lenders and first home buyers the flexibility and support to deal with the evolving COVID-19 situation,” he said.
The Commonwealth Bank’s head of retail banking services Angus Sullivan said this would help take the pressure of borrowers rushing to try and find property under difficult circumstances.
“In this uncertain time, we want to provide some certainty to customers who have reserved a place under the Scheme but have not found a property,” he said. “In light of the current environment, customers can now request to extend the 90-day deadline to find a property and enter a contract of sale for another 90 days. This will give customers a total of 6 months to find a property.”
Of the 7,700 applicants who have already taken up spots, the average deposit size is 7% of the total property value. About 40% of applicants are single and their average income is $67,700. Of the 60% of applicants who are couples, their average joint income is $110,300.
Minister Housing and Assistant Treasurer Michael Sukkar said the scheme was “performing well and is helping even more Australians each week get into their own home sooner”.
“Guarantees are still available for those looking to purchase their first home,” he said. “Importantly, as the results show, the scheme is assisting Australians on middle incomes and supporting first home purchases in our capital cities, regional centres and rural areas as the Government intended.”