Brokers lose out to branches in FHB scheme

The scheme enables up to 10,000 first home buyers (FHBs) per financial year to secure a home loan with a deposit as low as 5 per cent, without paying lender’s mortgage insurance.

According to new data from the scheme, 865 Australians have secured a loan and signed a contract of sale on their first home with the assistance of the government guarantee.

Of these, 109 loans have already reached settlement, while a further 5,639 places in the scheme are “on hold” for FHBs, while they find and secure a property.

The data showed that 50 per cent of loan applications lodged under the scheme so far have been originated in the branches of participating lenders, making branches the most popular origination channel for scheme applications.

Only 29 per cent of secured places under the scheme were introduced via the third-party channel, well below the current market share of broker-originated loans of around 55 per cent.

Young borrowers flock to FHLDS

The data showed that young Australians have embraced the scheme, with 55 per cent of approved applicants to date aged below 30, and 34 per cent of applicants aged between 25 and 29. 

Further, 60 per cent of all scheme participants have applied for a loan on their own, with the average income for a single applicant being $67,090, well below the income cap of $125,000 for individual applicants.

The average combined income for couples in the scheme is $111,373, just over half the $200,000 income cap for couples.

Of the 865 applicants who have been issued a guarantee certificate (meaning the applicant has secured a property and signed a contract of sale), 70 per cent have purchased a house, 25 per cent have bought an apartment and 5 per cent secured a townhouse.

Where FHLDS buyers are purchasing

According to applicants’ “purchase location intentions”, Sydney has been the most popular city for FHBs, with the NSW capital accounting for 19.4 per cent of intended purchases, followed by Melbourne, making up 16.0 per cent. 

Brisbane comes in as the third most popular location for first home buyers under the scheme, at 9.8 per cent of intended purchases.

The remaining proportion of loans are for houses outside of these three cities.

Minister for Housing Michael Sukkar stated that the First Home Loan Deposit Scheme is already working to help Australians get into the property market sooner, stating that saving for a 20 per cent home loan deposit is “one of the biggest barriers for first home buyers”.

“The scheme is cutting years off the time it takes to secure a deposit, allowing Australians to realise their dreams of owning a home sooner,” Minister Sukkar said.

Commenting on the data, Kristin Brookfield, the chief executive of industry policy at the Housing Industry Association, said the numbers are encouraging for younger Australians, who have shown how eager they are to achieve home ownership and to not necessarily settle in the expensive capital cities.

“A large number of applicants, including Millennials, are looking to buy outside the major cities of Sydney, Brisbane and Melbourne,” Ms Brookfield said.

“This suggests that people are starting to think outside the box (and the capital cities) when they think about buying their first home.”

Ms Brookfield noted that the extensive demand for freestanding homes by scheme participants suggests that participants are purchasing older, existing homes, instead of new homes.

“This is something HIA has raised with the government, and we will continue to investigate as the scheme matures to ensure first home buyers have a choice,” she said.

“There is no simple or single solution to increasing the rates of first home ownership, but it is important to ensure that at the heart of any incentive scheme, greater housing supply is a core objective. 

“Achieving this helps both first home buyers and those renting and saving their deposit.”

Ms Brookfield also hoped that the strong uptake for the scheme might “encourage the government” to consider increasing the number of places available within the scheme in 2021.

“All Australians seek to have secure housing options. Home ownership is an important fundamental of achieving that, and increasing housing supply will have trickle-down effect for the economy as a whole.

“HIA is heartened to see the scheme receiving so much interest and so many first home buyers now being able to achieve their homeownership dream.”

[Related: FHB scheme applicant trends revealed]