Liberals’ new housing policy a scheme of “winner and losers.”

Image Source: Your Mortgage

By Nikita Skuse and Anna Day | @nikita_skuse  @anna_day_

As the coalition sets for another term in government, many young Australians are left wondering how they will benefit from the liberals’ relatively last-minute election promise for first home buyers.

The First Home Loan Deposit Scheme aims to help eligible first home buyers purchase a house with just a 5 per cent deposit, with a government guarantee for 15 per cent of the loan.

Under the scheme, first homebuyers could save around $10,000 in Lenders Mortgage Insurance.

Lenders Mortgage Insurance is a one-off insurance premium paid by homebuyers that protect banks against the potential loss they would incur if homebuyers are unable to repay their home loans.

The scheme is available for first home buyers with an income of up to $125,000 or $200,000 for couples and will be limited to 10,000 loans per year.

UniSA Property Economics Lecturer Peter Rossini said the First Home Loan Deposit Scheme will only help a select few get into their own homes.

“This is very much a scheme with winners and losers,” Mr Rossini said.

“First home buyers face two hurdles to home ownership, getting credit and saving for the deposit. While this scheme may assist with the second it does not significantly address the first.

“High-income earners are likely to be able to access this scheme and more quickly enter the property market or buy a more expensive property.

“Low-income earners, relatively younger people, are unlikely to meet the credit rules and so will not be able to take up the scheme.”

Mr Rossini said the people who will benefit from the First Home Loan Deposit Scheme are those on higher incomes but with limited savings.

“They are likely to meet the stringent long-term credit rules and the additional deposit money will enable them to either, buy a more expensive home, or remove (or reduce) the need for mortgage insurance or a guarantor,” he said.

“Typically, this group are the most likely to benefit from a family cash transfer (the bank of mum and dad) or an inheritance.

Mr Rossini said research from the Australian Housing and Urban Research Institute shows there is an increasing expectation that either of these two cash flows is needed to enter the housing market.

“If the scheme increase prices, which has been the history of first home owner schemes, then those who cannot enter the scheme, mainly lower income earners will be worse-off as demand for entry-level homes and hence prices may increase,” he said.

Recent first homebuyer Talia Turtur said that buying a house is much harder now than it was for her parents’ generation.

“I have been saving my whole working life and have just needed to be smart about my spending the whole way through,” Ms Turtur said.

“Of course, this means making some sacrifices but in the end, you are better off.”

Ms Turtur said she had considered applying for a First Home Owner Grant offered by the state government but as the value of her home was above the grant threshold she decided against it.

“We believed that it was not worth devaluing our house just so we could gain the $15,000 grant,” she said.

If the Liberals new First Home Loan Deposit Scheme was in place when she was buying her property, however, Ms Turtur said that she would have benefitted as it would have meant she didn’t need a guarantor on her home loan.

The First Home Loan Deposit Scheme will start on 1 January 2020.

 

 

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