The broking industry is bracing for a bumper few months as the expanded Home Guarantee Scheme starts today, accelerating home buyer demand.
The Home Guarantee Scheme expansion comes into effect today (1 October), three months ahead of its original starting date, opening up the government-backed mortgage program to all first home buyers – regardless of income.
Brokers have already seen increased inquiry from first home buyers ahead of its start date, with many industry leaders suggesting that this spring will likely be a bumper season for broker services and mortgage demand.
Simon Orbell, mortgage and financial adviser and head of partnerships at Smartmove Professional Mortgage Advisers, said: “There’s no question there’s been a surge of interest in the new Home Guarantee Scheme. We’ve run multiple webinars since the announcement, and they’ve been warmly received.
“It’s a hot topic for our clients and their parents, with plenty of discussions happening. While some lenders [were] waiting until October 1 to fully implement the changes, the early signs show this scheme is attracting strong attention across the board.”
Orbell said that potential users of the expanded scheme have been particularly interested in the removal of the means test and the ability to purchase homes up to $1.5 million.
“That opens the door to more expensive markets, such as Sydney and Melbourne, where many first home buyers want to live,” he said and added that while first home buyers had previously felt “shut out of these areas”, now there is “a real sense of opportunity”.
“Previously, the scheme had limited spots, creating a rush for access, almost like people queuing outside the Apple Store for the latest iPhone knowing there were only a handful available.
“Now, with broader eligibility and simpler rules, buyers can take a more considered approach to one of the biggest decisions of their lives. Our clients like that it’s easy to understand, because when things are too complicated we often see inaction. This time, the reaction has been the opposite.
“While it’s still early days, we’re seeing an uptick in first home buyer interest and approvals. Clients are asking about it, parents are talking about it, and lenders are preparing for the demand.
“It’s one of the most discussed topics in our conversations right now, and we expect momentum to build as the scheme beds down.”
Aggregator and lender heads have also forecast strong mortgagor demand in the months ahead.
Mortgage Choice CEO Anthony Waldron said that “competition in the market is likely to ramp up” with the expanded scheme, as it will “deliver a powerful boost to first-home buyers, with upfront costs to enter the market coming down, and borrowing power boosted”.
“The removal of Lenders Mortgage Insurance (LMI) via the scheme will save buyers tens of thousands, while lower rates will give them a critical lift in the amount they can borrow,” Waldron said.
“This is a window of opportunity hopeful homeowners haven’t seen in years,” he said and added that home buyers should “start the process and get their ducks in a row”.
“Expert advice from a mortgage broker can make a world of difference.”
Loan Market CEO David McQueen echoed this and stated that Loan Market’s pre-approval figures are up 29.5 per cent compared to the same time last year.
“Building a deposit has been the biggest challenge for first home buyers following Covid-driven property price rises and increased inflation. The scheme’s five per cent deposit offering will be welcomed by those looking to break into the market,” he said.
“It’s incumbent on brokers to help first home buyers make a sustainable transition to ownership, acting in the client’s best interests during their purchase and beyond.”
Meanwhile, Adam Brown, executive for broker distribution at National Australia Bank (NAB), said the expanded scheme would be welcome news to first home buyers as it “open[s] up more opportunities for Australians to take their first step onto the property ladder”.
“NAB is proud to support this scheme, helping first-time buyers turn their home ownership aspirations into reality,” he said.
“With activity in this segment likely to pick up, it’s a timely opportunity for brokers to engage with first home buyers, guide them through the scheme, and provide support throughout the purchasing journey.”
However, while brokers have acknowledged this lowers barriers to entry and helps buyers save tens of thousands upfront, several have told The Adviser that it does not solve long-term affordability, with risks of inflated house prices, unsustainable repayments, and higher stamp duty costs.
Association leaders, including the Finance Brokers Association of Australia (FBAA) and Mortgage and Finance Association of Australia (MFAA), have also stressed that without broader reforms to boost housing supply, the scheme risks being a short-term political win that benefits sellers more than buyers.
The new Home Guarantee Scheme
Under the expanded First Home Guarantee, eligible buyers can purchase a home with just a 5 per cent deposit, while the government guarantees the remaining percentage needed to access a loan without paying lenders mortgage insurance (LMI). Treasury figures suggest that in the first year alone, first home buyers using the scheme will save around $1.5 billion in potential mortgage insurance costs.
While income limits and placement caps have been removed, first home buyers will still need to meet some criteria, such as being an Australian citizen or permanent resident over the age of 18 who is purchasing a property to live in.
Borrowers must also have a minimum deposit savings of at least 5 per cent of the property value.
A new eligibility tool is now available from the Housing Australia website to help borrowers understand whether they qualify for the expanded scheme.
Given that the median home price in Australia today is $844,000, new property price limits now apply. They are as follows:
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NSW – capital city and regional centre: $1,500,000
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NSW – other: $800,000
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Victoria – capital city and regional centre: $950,000
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Victoria – other: $650,000
- Queensland – capital city and regional centre: $1,000,000
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Queensland – other: $700,000
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Western Australia – capital city: $850,000
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Western Australia – other: $600,000
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South Australia – capital city: $900,000
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South Australia – other: $500,000
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Tasmania – capital city: $700,000
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Tasmania – other: $550,000
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The ACT: 1,000,000
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The Northern Territory: $600,000
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Jervis Bay Territory and Norfolk Island: $550,000
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Christmas Island and Cocos (Keeling) Islands: $400,000
More lenders are expected to be brought online for the expanded scheme.
The expanded Home Guarantee Scheme also provides unlimited places for regional buyers (who previously were limited to capped placements under the now-defunct Regional First Home Buyer Guarantee).
To date, more than 185,000 Australians have used a federal housing program, including over 60,000 regional home buyers.
[Related: Industry reacts to Home Guarantee Scheme expansion]
