Hopeful first-home buyers struggling to get into the property market due to skyrocketing prices will have the chance to purchase with a deposit of just 5%.
The federal government has announced that thousands of unused spots in its First Home Loan Deposit Guarantee Scheme from last financial year will be reissued and added to this year’s pool.
First announced in 2019, the program allows single people earning up to $125,000 and couples earning up to $200,000 together to purchase a brand new or established home with as little as a 5% deposit.
As of July this year, eligible recipients who are single parents can buy with just a 2% deposit.
The government guarantees the rest up to 20%, meaning borrowers aren’t slugged with costly lenders’ mortgage insurance.
On Thursday, Prime Minister Scott Morrison announced that 4651 previously allocated spots would be back on offer, as those guarantees were taken up by people who weren’t able to buy in the midst of Covid-19.
Those cited reasons include losing employment or having salaries reduced due to lockdowns, as well as the rapid increase in house prices rendering some 5% deposits inadequate.
“The pandemic and lockdowns have interrupted the plans of many homebuyers this year, so this is about ensuring we give thousands more families the opportunity they need,” Mr Morrison said.
“We want to help Australians into their first home, or a home that they’ve had built for them and their family, and with our support, first-home buyer [activity is] at [its] highest level in nearly 15 years.”
Properties purchased via the scheme are capped at $800,000 in Sydney and $700,000 in Melbourne, while in Brisbane the price can’t be any higher than $600,000.
So far, some 60,000 homes have been purchased using the guarantee, according to government figures.
Ken Morrison, CEO of the Property Council of Australia, welcomed the reallocation of the unused spots.
“This decision will help more first-home buyers jump the ‘deposit gap’ that all too often prevents people and families getting into the market sooner, as well as stimulate new housing which will lay the foundations for a strong economic recovery off the back of a two-year pandemic,” he said.
Dr. Michael Baumann, executive general manager of homebuying at the Commonwealth Bank, said 10,000 borrowers had used the scheme since its inception.
“As we enter the new year, it’s exciting that even more customers will be able to realize their homeownership dreams with CommBank with a deposit of as little as 2%,” Dr Baumann said.
“This is particularly important as first-home buyers are increasingly faced with affordability challenges with rising house prices and a rising external rate environment.”