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Government to reissue unused FHLDS guarantees

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Annie Kane 6 minute read

The federal government has revealed that it is to reissue unused guarantees from the first tranche of the First Home Loan Deposit Scheme “in the coming days”.

The Assistant Treasurer and Minister for Housing, Michael Sukkar, has announced that the federal government is to reissue unused First Home Loan Deposit Scheme (FHLDS) guarantees from the 2019-20 financial year.

Under the first tranche of the scheme (which ran from 1 February to 1 July 2020), 10,000 places were made available to help first home buyers purchase or build a new home with a deposit of as little as 5 per cent. Under the scheme, the government guaranteed up to 15 percent of the value of the property to help borrowers secure a loan without having to pay lender’s mortgage insurance, in a bid to help more borrowers enter the property market faster.

The first tranche of the FHLDS proved very popular, with initial places in the scheme reserved within four months of launching. The broker channel drove half of all applications to the scheme in the 2019-20 financial year.

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However, nearly 2,000 guarantees were not finalised – due to first home buyers not settling on their purchase (for one reason or another).

Minister Sukkar commented: “Since the commencement of the scheme a year ago, there has been an extraordinary take-up of guarantees by first home buyers with more than 15,000 first home buyers already settled and moved into their home since 1 January 2020…

“To further support first home buyers, the Morrison government will reissue unused guarantees from the 2019-20 financial year from buyers who have since been unable to complete their purchase of their first home.

“This represents a great opportunity for around 1,800 buyers to now enter the property market sooner. First home buyers will be able to apply for these guarantees from the scheme’s lending panel lenders in the coming days.”

Further details of applying for these unused guarantees have not yet been released.

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FHLDS phase 2 and the New Home Guarantee

As part of the Morrison government’s Economic Recovery Plan to create jobs, rebuild the economy and “secure Australia’s future”, the second phase of the FHLDS was extended so that an additional 10,000 first home buyers could purchase or build a new home with a guaranteed loan until the end of this financial year.

The second tranche (for the financial year 2020-21) comprises two parts: 

  • 10,000 FHLDS places for those seeking to purchase a new or existing home, available until 30 June 2021; and 
  • 10,000 places for those seeking to purchase or build a new home under the First Home Loan Deposit Scheme (New Homes).

According to the Treasury, over 4,200 first home buyers have accessed the extended scheme to build or buy a new home since launching three months ago.

Mr Sukkar commented: “The Morrison government’s commitment to backing first home buyers is delivering results…

“Helping Australians get into a home of their own and supporting tradies’ jobs are both key priorities for the Morrison government as we build our comeback from the COVID-19 recession.”

The impact of the FHLDS

The FHLDS, along with other government support schemes and grants (like the First Home Super Saver Scheme, HomeBuilder grant or state and territory First Home Owner Grants and stamp duty concessions), has contributed to a surge in first home buyer (FHB) activity.

According to the Australian Bureau of Statistics’ data from December 2020, FHBs continued to enter the market at the highest level since 2009, with the number of owner-occupier first home buyer loan commitments rising 9.3 per cent.

This was an increase of 56.6 per cent from the same time last year.

Major banks such as NAB and CBA (the only two majors who took part in the FHLDS) have also reported strong FHB activity. 

NAB recently revealed that lending to first home buyers increased by 21 per cent against their 12-month average, with regional areas across the nation recording a 44 per cent increase in first home buyer activity. 

Meanwhile, CBA has also recently recorded a sharp rise in its owner-occupier lending portfolio, which grew from $304.6 billion in November 2020 to around $307.0 billion in December 2020. This was, in part, due to FHB activity.

[Related: FHLDS New Home Guarantee details released]

Government to reissue unused FHLDS guarantees
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

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