First Home Deposit Scheme
With the federal election over, now is a good time to take a closer look at the Morrison Government’s First Home Deposit Scheme (FHDS).
The FHDS allows first-home buyers access to loan guarantees so they can buy a property with deposits of just 5 per cent of the price.
Support is available to first-home buyers below a certain capped income level which is $125,000 for single people and $200,000 combined income for a couple if they have saved 5 per cent of the value of the home. An income test is conducted on the previous year’s taxable income to determine eligibility. Due diligence processes will apply in approving a loan.
Buyers won’t need to have a full 20 per cent deposit and will save around $10,000 by not having to pay lenders mortgage insurance. The Scheme will commence on 1 January 2020 and is limited to 10,000 first homebuyers. If the borrower refinances or the loan comes to an end the Commonwealth support will terminate.
Equity of $500m will be set aside by the government through the National Housing Finance and Investment Corporation, which will guarantee loans up to a value of 20 per cent of the home.
So, it sounds like a good idea, but will a first-home buyer really be better off and is the right focus for government in responding to affordable housing?
A Domain Research Analysis ran its ruler over the numbers.
It found “a hypothetical first-home buyer scenario shows that while the scheme is a better alternative to securing lenders mortgage insurance, it will cost tens of thousand more than a 20 per cent deposit over the life of the loan.
It suggests “first-home buyers should look long and hard at the scheme before jumping at it, paying particular attention to additional servicing costs as well as factoring in potential capital gains and the cost of renting while saving.”
And The Grattan Institute's Brendan Coates had this to say on the ABC’s 7.30 program.
“The reality is we can only help first home buyers if someone loses, which means prices probably have to fall," Mr Coates said.
"The reality is quite a lot of those people will never get access to this scheme because they may struggle to ever be able to afford a loan based on bank regulations around how much you've got to be able to repay. It means the policy's … going to be fairly irrelevant, it's not going to do a lot to boost home ownership," he said.
Targeted initiatives that assist first homebuyers into the market are welcome. For many years Keystart has been supporting WA first homebuyers into home ownership. Unfortunately, it seems that this Commonwealth initiative will do little to assist people on very low, or low to moderate incomes access an affordable home.
Shelter WA urges the Morrison Government to do more to facilitate investment into new affordable housing supply. A national housing strategy, which aligns all the policy levers across government, developed in partnership with industry, the community sector and the community sector is needed. This will provide a framework to consider government interventions to ensure that they are working towards a common outcome and providing more diverse and affordable housing products for all people in the community.
With thousands of people on the waitlist for social housing, private rentals unaffordable to people on low incomes and homelessness increasing, a more strategic and targeted approach is needed by government to ensure everybody has a place to call home.
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