Deposit Scheme Eases Path to Ownership

Posted on 24/09/2019  
Deposit Scheme Eases Path to Ownership

Legislation giving effect to the Commonwealth Government’s deposit gap scheme will ease the pathway to home ownership.

The scheme – promised in the lead-up to the Federal Election – helps remove barriers to first-home buyers (FHBs) by reducing the deposit savings requirement and effectively reducing mortgage insurance costs. FHBs will be able to access loans with a deposit of only 5%.

FHBs are becoming increasingly active around Australia. The latest Australian Bureau of Statistics data shows that 28.5% of housing finance commitments in May were FHBs, compared to 20.4% two years ago.

The UDIA’s national executive director Connie Kirk says the next critical step is getting design features right for the deposit gap scheme. The UDIA has been working with the National Housing Finance and Investment Corporation (NHFIC), which is responsible for the scheme’s implementation and ongoing management.

“The scheme recognises that saving for a deposit is arguably the biggest hurdle most home-buyers face in trying to enter the market,” she says.

“The escalation in house prices in the biggest cities in the past decade has widened the deposit gap, so the Commonwealth’s decision to effectively go guarantor on a portion of the loan makes sense.

“It sits well alongside other initiatives to improve housing affordability – like retention of negative gearing and capital gains tax arrangements, and improved loan serviceability assessment rules.”

The draft legislation proposes variable price caps for different capital cities and regions, which Kirk says is a logical step.

“We would also urge that the same flexibility apply to income thresholds, particularly in the most expensive capital cities like Sydney and Melbourne.

“Our research shows that singles in particular on the proposed income threshold of $125,000 would not be able to access housing in large tracts of Sydney and Melbourne.”

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