First home buyers are one step closer to a discounted deposit after the Government introduced the legislation to implement the First Home Loan Deposit Scheme last week.
The scheme will support 10,000 first home buyers each financial year, which barely scratches the surface of buyers.
Treasurer Josh Frydenberg says: “In the past year, more than 110,000 Australians bought their first home – the highest level since 2009.”
Just last week the Australian Bureau of Statistics revealed that new mortgage lending increased by 3.9 per cent in July this year.
ABS Chief Economist, Bruce Hockman says: “In July, growth in new lending commitments to households was the strongest since October 2014.”
The scheme will allow first home buyers on low and middle incomes to purchase a home with a small five per cent deposit.
The applicants can earn up to $125,000 annually for singles and up to $200,000 annually for couples. The scheme will only apply to owner-occupier loans with principal and interest repayments.
Frydenberg says: “The Government recognises that saving a deposit has become a more significant barrier to entering the housing market than the ability to service a home loan. It can take ten years for the average first home buyer to save a 20 per cent deposit.”
The first home buyers will not be subject to lenders’ mortgage insurance as the government will underwrite the home loans and serve as guarantor.
Lenders can choose to participate. They will need to update their internal systems and train staff on the eligibility criteria.
The legislation also establishes the National Housing Finance and Investment Corporation’s (NHFIC) new research function.
The new function will examine housing demand, supply and affordability in Australia, complementing existing housing-related research.