The Morrison Government’s election pledge to make it easier for first home buyers to enter the market is moving ahead.
Under the First Home Loan Deposit Scheme, individuals earning up to $125,000 and $200,000 for couples will be able to obtain loans with a loan-to-value ratio of as much as 95%. This means they’ll only be required make a minimum 5% deposit on their home loans. The government will underwrite their home loans and will serve as the guarantor.
The government plans to start the annual program by January 2020, with a cap of 10,000 loans per year. Properties purchased under the scheme will be subject to regional price caps to ensure equitable access across Australia.
Urban Development Institute of Australia National President Darren Cooper said the scheme will bea great help for many Australians who are finding it hard overcome the home loan deposit hurdle.
“Supporting eligible first home buyers who have saved 5% deposit by guaranteeing the balance of 20% deposit through this scheme is a great initiative,” he said. “Its truly a leg up for them and could not have come at a better time, since house prices have been increasing much faster than household incomes.”
The Housing Industry Association also welcomed the scheme.
“The introduction of the scheme to support the home ownership aspirations for 10,000 first home buyers is a key milestone in delivering this key election commitment,” HIA Managing Director Graham Wolfe said.
“The First Home Loan Deposit Scheme will save an average first home buyer in Sydney, with less than a 20% deposit, tens of thousands of dollars over the life of the loan.”