Westpac subsidiaries St George, BankSA and Bank of Melbourne can now offer customers loans where the Government acts as guarantor of a portion of the property.
These initiatives allow eligible homebuyers to borrow with deposits as small as 2% (the Family Home Guarantee) or 5% (the Regional and First Home Guarantees) without paying lenders mortgage insurance (LMI).
Westpac itself joined the scheme in July, and Westpac Managing Director of Mortgages, Richard Burton says Australia's second largest bank has already helped more than 1,000 Aussies buy property with a government guarantee.
"Through expanding access to the Home Guarantee Scheme, St.George, Bank of Melbourne, and BankSA will be able to help more Australians into the property market sooner with a smaller deposit,” he said.
He also said these guarantees could be particularly useful for younger Australians.
In Westpac's latest home ownership report, 44% of Gen Z respondents said they intended to buy property in the next five years, the highest of any demographic.
More than one in 10 (11%) said they planned to become home owners in the next year, more than double the overall national average.
"It’s encouraging to see that despite the higher cost of living and other affordability challenges, younger Australians are still the most driven in wanting to purchase a home and are taking steps to prioritise this goal,” Mr Burton said.
How do these guarantees work?
The main objective of these initiatives is to allow Australians to buy property sooner, with a smaller deposit, and avoid paying large LMI premiums.
Under the First Home Guarantee (FHG) for example, the Government acts as guarantor for up to 15% of the property value, so will step in to make repayments if the buyer defaults.
This provides extra insurance for the lender that it will not make a loss, so first time borrowers can buy with a minimum deposit of 5% and still avoid LMI.
Each year, there are limited spots available for all three guarantees.
|Available spots each year
|Borrowers minimum deposit
|First Home Guarantee
|Family Home Guarantee
|Regional Home Guarantee
Image by David Floyd via Pexels
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