‘Great news’: Budget to expand home-buyer scheme

The Home Guarantee Scheme was set to end in June, but with escalating property prices the government will extend the program and establish an additional initiative for people in regional areas.

Under its new Regional Home Guarantee, up to 10,000 places each year will be available for home buyers (including non-first) and permanent residents to purchase or construct a new home in regional areas.

Regional broker Christine Dunkerton at Loan Market Western Australia said the announcement comes as “great news” for her clients.

“I’m excited to see more of my clients, not just the first home buyers, eligible to secure their home with no LMI payable whilst also attracting more competitive interest rates,” Ms Dunkerton said.

With the recent property boom across regional Australia, Ms Dunkerton said reviewing the regional threshold would further help more people get access to a new home.

The existing price cap for first home buyers and Family Home Guarantee properties in regional Western Australia is $400,000 and $500,000 in the capital, while the average house price is more than $600,000 in the capital according to Domain, limiting some buyers from entering the market.

“But it’s a win either way from my point of view,” Ms Dunkerton said.

“[It] would be amazing if the government provided us with some form of live leaderboard so brokers can easily see which lenders actually have reservation places available.

“This would take the guesswork out and I’m sure the lender [BDMs] would appreciate not having to field so many calls from their broker partners.”

While the details will be outlined in Tuesday’s (29 March) budget, Treasurer Josh Frydenberg said the housing plan would support thousands more Australians to buy their own home sooner.

“The home guarantee scheme ensures part of an eligible buyer’s home loan is guaranteed by the Government, enabling Australians to buy a home sooner with a smaller deposit and without needing to pay lenders mortgage insurance,” Mr Frydenberg said.

In addition 5,000 guarantees will be issued to expand the Family Home Guarantee, from 1 July 2022 to 30 June 2025.

The single-parent family housing scheme supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2 per cent.

Changes to LMI should be “carefully considered”

While the Insurance Council of Australia (ICA) remains supportive of the “central objective” of the schemes to facilitate home ownership, it warns changes to the “well-functioning” lenders mortgage insurance should be carefully considered.

The Insurance Council said by displacing a proportion of the LMI market, the cost of providing LMI to borrowers who do not access the scheme is “potentially impacted”.
 
Adding that without a strong and stable LMI sector, small and medium lenders could be at a “disadvantage” compared to larger lenders and disproportionately impact borrowers on lower-than-average incomes including first home buyers.

CEO Insurance Council of Australia Andrew Hall said LMI has played a “crucial role” in supporting prudent high loan-to-value lending in Australia.

“[The scheme] provides creditworthy borrowers, without a substantial deposit, with a timely and cost-effective way to access home loans,” Mr Hall said.

“In establishing the scheme, we were pleased the Government acknowledged the value of the LMI sector and the important role it plays in the housing market.

“The insurance sector supports initiatives that improve access to home ownership, however it’s important that unintended consequences are carefully considered and that policy settings support the ongoing health of the successful LMI sector.”

Labor promises Regional First Home Buyer Scheme

Opposition Leader Anthony Albanese, if elected into power at the upcoming federal election, has made similar promises for a housing deposit scheme.

Under Labor’s proposed Regional First Home Buyer Support Scheme, there would be 10,000 places a year for families in regional areas and eligible buyers would be able to purchase a house with a deposit as low as 5 per cent, without needing to pay lender’s mortgage insurance.

The Labor government would provide a guarantee of up to 15 per cent of the property purchased, as well as triple the number of places that regional residents received under the government’s current measures last year.

Almost 60,000 Australians have been supported by the federal government's Home Guarantee Scheme, with a focus on women and frontline workers.

The government said of total guarantees issued, 52 per cent went to women, well above the market average of 41 per cent women, while 85 per cent of Family Home Guarantees were taken up by single mums.

The full details will be delivered at tonight's federal budget (Tuesday, 29 March 7:30PM). 

[Related: Labor promises ownership scheme for regional FHBs]