The federal government’s First Home Loan Deposit Scheme has under-utilised the broker channel and left brokers in the dark, a Sydney-based broker has said.
A Sydney-based broker has called out the federal government’s First Home Loan Deposit Scheme (FHLDS) for its limited access via the broker channel.
The scheme, which officially launched on 1 January 2020, aims to allow up to 10,000 first home buyers (FHBs) per year to access the property market sooner, by providing them with access to a mortgage with just a 5 per cent deposit.
The government has agreed to guarantee the difference between the borrower’s 5 per cent deposit and the standard 20 per cent deposit required to take out a home loan without paying lender’s mortgage insurance (LMI).
Zippy Financial director and principal broker Louisa Sanghera, who was named Broker of the Year 2019 at the Australian Broking Awards last year, has added to growing criticism of the scheme by stating that it has been poorly organised and could limit competition by having only a small pool of lenders that are accessible via the broker channel.
“It does seem like the policy has been rushed and not been properly thought through,” Ms Sanghera said.
“First home buyers are mostly in the dark about how the scheme will even work.”
And first home buyers aren’t the only ones left in the dark, according to Ms Sanghera.
The broker highlighted that a large number of mortgage brokers were also struggling to understand the finer details of the scheme, and have been given limited access to information.
While the MFAA had previously suggested that the National Housing Finance and Investment Corporation (NHFIC) would provide information and resources to brokers via a broker portal on their website, no such portal has yet been released.
A representative of the NHFIC, the body overseeing the administration of the FHLDS, told The Adviser that brokers would be provided information on how to write loans for the scheme directly through the participating lenders.
As Ms Sanghera points out, this provides a problem for brokers trying to assist their first home buyer clients, as only a small number of the 25 non-major banks are accessible via the broker channel.
“Many of the lenders are [not] available on mortgage broker’s panels, even though brokers write about 65 per cent of mortgages in Australia, so we have no access to them,” she said.
Further, NAB, one of the two participating major banks (which most brokers would have accreditation with), has stated that FHLDS loans will not be accessible through brokers at the point of its initial launch, further restricting access to both loans and information for mortgage brokers.
According to Ms Sanghera, the set-up of the scheme has undermined the use of mortgage brokers, and encouraged first home buyers to deal directly with the banks. However, she highlighted that this means FHBs would be disadvantaged by not having a broker to help them through an already burdensome administrative process.
“If first home buyers don’t use a broker, they’ll have to go through a maze of paperwork and compliance information required to obtain a loan by themselves, which will ultimately make the process much more difficult and stressful for them,” she said.
Ms Sanghera is one of many brokers who have highlighted the limited scope of broker involvement in the scheme, due to the makeup of the lender panel.
The Minister for Housing Michael Sukkar has previously commented that the “composition of the panel should also enable strong activation of mortgage broker channels and promote choice for first home buyers”.
However, many brokers have noted that several of the smaller/regional lenders (who are expected to take up 50 per cent of the 10,000 loans) are not members of their aggregator’s panel – and therefore they would not be able to write loans to these lenders unless they directly accredit with them.
For example, brokers operating under the larger broker groups – AFG, Aussie, Connective, Loan Market and Mortgage Choice – are unable to access more than half of the lenders chosen to participate in the FHLDS.
[Related: CBA, NAB clarify start date for FHLDS]
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