HIA calls for first home loan deposit scheme to be expanded

author-avatar By on September 01, 2020
HIA calls for first home loan deposit scheme to be expanded

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Australia's peak home building body has called for the First Home Loan Deposit Scheme to provide more spots for those buying newly-built homes.

The Housing Industry Association (HIA) said yesterday's report on the First Home Loan Deposit Scheme (FHLDS) "outlines the initial success of the first release of 10,000 guarantees". 

"HIA is pleased to see the findings show the Scheme is providing support in home ownership for first home buyers and overcoming the deposit savings trap," HIA said. 

“The time it takes to save a deposit is always a challenge for first home buyers, but today more than ever, combining this with tougher lending restrictions had meant first home buyers were waiting years to achieve their home ownership dream."

“In this time of COVID-19, choosing to take the step of home ownership is not a decision taken lightly by first home buyers. The confidence they have shown to make this decision in the first half of the year is extremely encouraging."

Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

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  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

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Rates correct as of October 17, 2021. View disclaimer.

Released yesterday, the National Housing Finance and Investment Corporation's (NHFIC) report on the FHLDS scheme found that one in eight first home buyers who purchased between March and June 2020 did so using the scheme. 

On average, the scheme helped the average applicant save four years on the home buying process by reducing the deposit requirements, and the median applicants were in the 25-34 age bracket. 

According to the report, the scheme has "geographical reach supporting first home buyers across the country with strong interest from buyers in outer metropolitan and regional areas", and has "cemented itself as part of the first home buyer support policy architecture". 

“HIA has long argued there needs to be a national approach to help first home buyers enter the market and address the time it takes to save for a deposit," HIA said. 

"The findings from the report confirm HIA’s view that this type of government support provides a significant boost for first home buyers.

“The report asserts the Scheme enabled first home buyers to bring forward their purchase by an average of four years. This means many more young Australians are getting into a home and building their financial future sooner."

More spots needed for home builders 

While the FHLDS scheme, in HIA's words, "was the right solution to a real problem", HIA also argued that the scheme needs to be expanded to help those building their own home from scratch, rather than buying. 

According to the report, just 10% of successful applicants purchased a newly constructed dwelling.

In a pre-budget submission made on 24 August, HIA said the scheme is not well suited to the new home building process. 

"In March, HIA called on the Government to provide a dedicated allocation of places under the scheme for new home buyers to ensure the economic benefits of home building are also part of its success," the submission said. 

"The second release of a further 10,000 places on 1 July 2020 has now commenced and the take up rate appears strong despite COVID-19 but the same concerns exist that new home buyers may not be participating in the scheme."

Looking to build your own home? The table below features construction loans with some of the lowest interest rates on the market for would-be home builders.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
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Basic Home Loan (Principal and Interest) (LVR 70%-80%)

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Construction Home Loan (LVR < 80%)

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Rocket Repay Home Loan (Interest Only)

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Standard Variable Home Loan (Interest Only)

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Standard Variable Rate Home Loan (Principal & Interest)

VariableMore details
FAST TURNAROUND TIMES AND FLEXIBLE LOAN OPTIONS

Basic Investment Loan (Principal and Interest) (LVR < 60%)

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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of October 17, 2021. View disclaimer.

In its submission, HIA recommended that:

  • additional places in the scheme be allocated in 2020/21 for new home buyers; and
  • the process and timeframes for confirming these places be amended to recognise the time involved inbuilding a new home

“Increasing the number of applicants able to access the Scheme would not only help to boost the economy, but will clearly help lower and middle income workers move into a home of their own much sooner.”

[Read: High demand expected for First Home Loan Deposit Scheme round two]

HIA's recommendation has previously been put forward by the Labor Opposition. 

Shadow Minister for Housing and Homelessness Jason Clare said in late June that the scheme should be expanded to include building new homes, which would support tradies.

"Labor is calling on the Morrison Government to expand the scheme by lifting the cap for first home buyers who build new homes," Mr Clare said in a statement. 

"This will assist first home buyers on low and middle incomes build a new home with a deposit of as little as 5% without the requirement to pay for lenders mortgage insurance, and keep tradies building homes instead of building a longer dole queue."

"Labor called for this on 30 May but it was ignored by the Government in its HomeBuilder scheme which has been panned as badly targeted and too small to save a lot of tradie jobs."

HomeBuilder, the scheme introduced to stimulate home construction and renovation, has so far had a slow uptake, with the Treasury revealing in mid-August that just 247 applications have been made across the country so far. 

However, states have only started accepting applications in the last few weeks.

[Read: HomeBuilder: Good? Bad? Both? How the experts reacted]


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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