One in 10 first home buyers backed by government guarantees

author-avatar By on October 08, 2021
One in 10 first home buyers backed by government guarantees

Almost 33,000 borrowers were helped by two government first home buyer schemes according to the latest data.

The National Housing Finance and Investment Corporation (NHFIC) released new data and trends on the First Home Loan Deposit Scheme (FHLDS) and the New Home Guarantee (NHG).

These schemes enable first home buyers to shirk lenders mortgage insurance despite paying only a 5% deposit.

The Government guarantees the remaining 15% usually required for a deposit, and there are upwards of 30 lenders participating in the schemes.

The findings revealed that since 1 January 2020, there have been 22,879 homes purchased or built supported by the FHLDS and the NHG.

This represents almost 33,000 new home owners; the top states that were supported were NSW (11,000 recipients) and Queensland (9,000 recipients).

The strongest proportional demand for the guarantees came from Queenslanders, making up 26% of FHLDS guarantees issued and 27% of NHGs.

By postcode, demand for the FHLDS was strongest in Melbourne's north-west with 109 guarantees issued.

For the NHG, Sydney's north-west recorded the largest volume of recipients at 158.

The geographical coverage of schemes was broad in line with the general population distribution, with more people accessing the NHG near capital cities (76%) compared to the FHLDS (63%).

Nathan Dal Bon, NHFIC CEO, said it's great to see Australians from all walks of life are being helped by these schemes. 

"The interstate migration to the regions is particularly noteworthy and reflects a trend we have seen since COVID-19," Mr Dal Bon said.

"This is particularly pronounced in Queensland which has been the greatest benefactor of interstate migration."

Buyers were willing to move away from their current residences to own their first home, particularly under the NHG, throughout 2020-21.

NHFIC reported that buyers moved an average of 8.4km under the FHLDS, and 13km to use the NHG. 

At one stage last year, it was estimated the FHLDS alone was supporting up to one in eight first home buyers.

FHLDS helped reduce debt despite dearer houses

The amount of debt new home buyers have accumulated relative to their income has declined 'modestly' under the FHLDS despite rising house prices.

The average debt-to-income ratio of FHLDS recipients is down from 4.92 in 2019-20 to 4.79 in 2020-21 according to NHFIC. 

Support for both schemes was concentrated in the younger first home buyer demographic, as 58% of recipients were younger than 30. 

Additionally, more than 3,700 key workers have been supported by the FHLDS and NHG throughout 2020-21, making up nearly 6,000 since early 2020. Of these key workers, 70% were nurses or teachers.

"With growing housing affordability pressures, it is also very pleasing to see the schemes have supported almost 6,000 key workers purchase their first home," Mr Dal Bon said.

NHFIC's analysis showed that buyers could own their homes sooner under both schemes.

On average, FHLDS recipients could own their homes four years earlier, while NHG recipients could own their homes four and a half years earlier. 


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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:

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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.

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Rachel is a Finance Journalist, and joined Savings in 2021. Coming from a background in the FinTech space, her interests include the innovation of lending technology, property, investing, and more. With a passion for educating and informing people about their finances, she hopes to increase the financial literacy of everyday Australians.

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