FHBs get by with a little help

OVER recent years, there has been a build-up of risks surrounding rising levels of household indebtedness from home ownership. These risks threaten the ability of homeowners to withstand economic shocks.

First home buyers (FHB) might appear more vulnerable than other owneroccupiers when it comes to keeping their homes during the high interest rateinduced, price downturn cycle. Especially as FHBs increased sharply during 2020, supported by government programs, as well as low interest rates.

In 2021 FHB commitments declined a little but were still above 20 per cent of the value of total housing loan commitments.

There’s caution now as the most recent ABS monthly data sits 48 per cent below the January 2021 high of 16,330 FHB loans.

Typically FHBs start with higher Loan to Valuation Ratios and lower liquidity buffers than other borrowers.

However a recent study suggests FHBs may not necessarily be more likely to experience financial stress than others.

The research was undertaken within the Reserve Bank by Maia Alfonzetti at the bank’s financial stability department.

The report pointed out that FHBs have historically experienced “favourable labour market outcomes, including higher levels of job security and income growth.”

There’s no doubt that many first timers have been enticed by government incentives. But what has been encouraging is that more than 1400 households have quickly moved out of the federal government’s First Home Loan Deposit Scheme by refinancing into standard mortgages, benefiting from the equity they had accrued.

This transition through the scheme suggests the success of the Morrison government initiative to support Australians getting into home ownership sooner than they otherwise would.

The ongoing scheme allows buyers to purchase homes with a 5 per cent deposit with the remaining 15 per cent guaranteed by the government.

Of the remaining 40,000-plus guarantees, close to 40 per cent are sitting ahead on their repayments.

Fewer than 0.04 per cent are in arrears considerably less than the broader 0.13 per cent Lenders Mortgage Insurance (LMI) market.