Prime Minister Scott Morrison has announced a new First Home Loan Deposit Scheme that will enable first home buyers to access a mortgage with a 5 per cent deposit. Mr Morrison said: “It can take nine to 10 years for an average household to save a deposit. We want to help Australians realise the goal of buying their first home by cutting years off the time it takes to save up.
The scheme will commence from 1 January 2020.
The First Home Loan Deposit Scheme, which will partner with private lenders and prioritise smaller lenders in a bid to “boost competition”, will be available to first home buyers who have been able to save a deposit of at least 5 per cent and earn up to $125,000 annually or $200,000 for couples.
Industry welcomes initiative
It currently takes more than eight years for first home buyers to save for a deposit to purchase a property in our major capital cities. This proposal has the potential to significantly reduce that time frame. One of the significant additional costs first home owners incur when they borrow more than 80 per cent of the property value is mortgage insurance, which is often in the thousands of dollars and would help FHBs save around $10,000 by not having to pay lenders’ mortgage insurance (LMI).
With first home buyers currently representing just 17.9 per cent of total housing loan approvals at the beginning of this year, the measure will be a timely boost not just for first home buyers but for the building sector and the economy in general.
Master Builders Australia also backed the First Home Loan Deposit Scheme, with its CEO, Denita Wawn, saying: “The scheme will be a boost for both first home buyers and residential builders who are worried about the declining housing market”.