Several members of the broking industry have welcomed the federal budget’s measures for home ownership, but some have noted that they will not curb the pace of house price growth.
On Tuesday evening (11 May), the federal budget for 2021-22 was handed down, outlining a range of steps to support home ownership and help small businesses recover from the coronavirus pandemic.
Following the full budget being issued last night, more members of the broking industry issued their thoughts on the spending package.
Connective: Encouraging more women and helping brokers
The executive director of Connective, Mark Haron, noted that the budget contained a range of initiatives that could benefit the broking industry and broker clients.
Mr Haron told The Adviser: “I think it is a very good budget for mortgage brokers and the housing market in general.
“The rise of schemes and incentives in terms of home ownership is a very good thing for mortgage brokers as the more homes are being purchased, the more that requires financing, which requires more brokers to help them do that,” he explained.
He added that the extended SME measures, such as the instant asset write-off extension and cash-loss provisions, also “provide an opportunity for brokers to engage with SME clients”.
“Brokers were integral with reaching out to their SME clients about COVID support and the Coronavirus SME Loan Guarantee Scheme, and the same goes for the SME Loan Recovery Scheme [which are available from 1 April 2021–31 December 2021].
“So, brokers should be across these measures and ensure they discuss them with their clients if they can help them,” he said.
The Connective executive director also welcomed the move by government to increase the Child Care Subsidy for families with two or more children aged five and under.
He said: “Some of the investment into boosting childcare subsidies is a very, very good thing, and we’d like to see a bit more there. Particularly because one thing that we need in the industry is more female participation. It’s very clear that female participation in the industry helps us increase the performance and productivity of the mortgage broking industry.
“We expect we’re going to be seeing this strong housing market for a long period, so brokers are very busy at the moment; they’re under the pump, and may continue to be so. So, it’s a really good time for brokers to be hiring staff and investing in the business if they need more staff to help, and I think this offers the opportunity to potentially hire, even on a part-time basis, more women.
“So, I’m hoping that these boosts in childcare subsidies will result in more female participation.
“And, of course, the subsidies will help brokers with their own childcare arrangements, too,” he said.
Mr Haron added that the expansion of the JobTrainer Fund and the Boosting Apprenticeship Commencement (BAC) wage subsidy, which underwrites up to $7,000 per quarter over 12 months in gross wages for new apprentices, trainees and graduates studying a Certificate II or higher until 30 September, could also help encourage more women into the sector.
“The schemes to provide investment into skills training are critical,” he said.
“It will help accelerate female participation into some of those jobs that are crucial at the moment for mortgage brokers, and over the longer term, bring in a more sustainable, trained workforce.
“If we can bring in more women, particularly those with experience in lending, that would be fantastic.”
FBAA: Nothing to avoid negative equity risk
The managing director of the Finance Brokers Association of Australia (FBAA), Peter White, said the body “strongly supports” the budget and its “measures to increase home ownership”.
“In particular, we welcome the support to first home buyers, single parents and women,” Mr White said.
“This budget can be a turning point in the lives of many people who deserve a break – including younger couples starting out and single parents. It will be exciting for many Australians.”
“Home ownership has become more difficult in recent times, and this has a flow-on effect across the economy, so these initiatives are urgently needed.”
However, he warned that “extremely low” interest rate environments can “create soaring house prices” and the government incentives may not address the root cause and cause some to fall into negative equity.
Mr White said: “[E]nter[ing] the housing market with very little deposit mean[s] that some people could end up with a negative equity position when interest rates rise again and property prices fall or correct.”
As, such, he said that the body “still encourages people to save as much deposit as possible as this will leave borrowers in a far better position in the long term”.
“However, overall, our advice is to never leave it too long to enter the property market as prices will always keep rising in the long term,” Mr White concluded.
Home Loan Experts: Price inflation still going to be an issue
The CEO of brokerage Home Loan Experts, Alan Hemmings, welcomed the single parent and first home buyers moves, but added: “Whether the measures went far enough to support first home buyers remains to be seen. Australia’s property prices are likely to continue rising for the foreseeable future, and similar schemes in the past haven’t been widely adopted or clearly understood by their target audiences.
“With the RBA making it clear that cooling the property market isn’t their focus, a lot of the problems that cause price inflation are still going to be an issue,” he said.
Mr Hemmings continued: “The Australian economy has already proven to be very resilient following the pandemic. Supported by successful schemes, including the HomeBuilder program, we’ve seen incredible recovery in the property market and our home loan experts have been working overtime to service the increase in demand.
“I hope [the budget] announcements help those Australians who weren’t able to get ahead of the boom.”
Loan Market: Better use of grants and a wider lender panel
Loan Market’s executive director, Andrea McNaughton, welcomed the Family Home Guarantee which she said would “help single mums and dads break the rental cycle and secure a future for their families”.
“For many people, it’s hard to break the rental cycle: 39 per cent of the first home buyers [that] Loan Market brokers serviced in the last 12 months were aged over 35,” she noted.
“Breaking the rental cycle is even harder when you’re single, have dependants, and are trying to get back on your feet financially after a relationship breakdown.
“At a time when interest rates are at their lowest-ever point, I’m sure the scheme will be well subscribed,” Ms McNaughton said.
However, she added that it was important for brokers to be “upfront with consumers in educating them on the realities of the scheme”.
“There are only 2,500 First Home Guarantees made available every year for the next four years, so it will be very competitive,” she explained.
“Single parents need to understand that lenders will still heavily scrutinise their capacity to service a loan, especially if they have multiple dependants. Having a 2 per cent deposit in the bank alone won’t be enough.”
The Loan Market executive director also suggested that the scheme could benefit from a wider lender panel, suggesting that Loan Market brokers had previously noticed that there were a “limited number of places offered across a concentrated volume of participating lenders” for the First Home Loan Deposit Scheme.
“We would like to see the scheme spread more widely across lenders,” she said.
As well as a larger lender panel, Ms McNaughton said it would have been “beneficial” to have enabled grants that had been made available used as funds to complete, for example for the HomeBuilder grant, “rather than acting as a cash boost at the end”.
“This would, in fact, help more buyers to build in the first place,” she said.
Ms McNaughton welcomed the expansion of voluntary superannuation contributions that can be used under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000, which she said would also help give single parents and first home buyers ”a better chance to compete in the market”.
“This is a better move than widespread housing affordability initiatives which have, in the past, tended to lift property values,” she said.
“Increasing the amount is sensible; it acknowledges the rapid price growth that’s happened in the majority of metropolitan and regional markets since the COVID-19 recovery got underway.”
Lastly, she highlighted that the extension of Boosting Apprenticeship Commencement scheme would “help brokers employ the extra support they need to service the unprecedented demand the industry is in right now”.
[Related: What’s in the budget 2021-22?]
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.
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