The Federal Government currently has three low-deposit home loan schemes running:
- The First Home Guarantee, which enables eligible first home buyers to access a home loan using a 5% deposit without paying lenders mortgage insurance (LMI). It has 35,000 places per year.
- The Regional Home Guarantee, which enables eligible first home buyers in regional Australia to access a home loan using a 5% deposit without paying LMI. It has 10,000 places per year.
- The Family Home Guarantee, which enables eligible single parents to access a home loan a 2% deposit without paying LMI. It has 5,000 places per year.
Each scheme has various eligibility criteria around the home being purchased, income and participating lenders, with more information available from the Government’s National Housing Finance and Investment Corporation (NHFIC).
Last week’s Budget outlined an expansion to the criteria of those who could qualify for home guarantee schemes:
- The offerings may now apply to any two applicants beyond spouses and de facto couples (for example, parents and children, siblings or even friends).
- Non-first home buyers who have not owned a home for at least 10 years may now be eligible for the First Home Guarantee and the Regional Home Guarantee (where they already qualified for the Family Home Guarantee).
- Single legal guardians of dependents may now qualify for the Family Home Guarantee.
- Permanent residents may now also qualify for the Home Guarantee Schemes.
The expansion of criteria makes these policies fairer, but it may not make them more effective. The relatively high-income thresholds around the First Home Guarantee in particular may help people into housing faster, who would have achieved home ownership anyway, limiting more equitable home ownership across income distributions.
If interest rates decline, these schemes will make more sense for hopeful home owners comparing the cost of taking on more mortgage debt with the ongoing costs of renting, and they will likely see more take up in the years ahead.
Excerpt taken from “Labor’s fresh take on housing, but could the budget go further?”