Experts tip scheme to bring home big savings

PROPERTY experts say a first-home loan deposit scheme announced on Sunday will have a limited impact on prices but a major impact on the ability of low-medium income Australians to enter the market.

Under the scheme, the government will allow first-home buyers who have saved a deposit of at least 5 per cent to get access to a home loan without lenders mortgage insurance.

The government will act as a guarantor on these loans, essentially underwriting the risk.

Prime Minister Scott Morrison said, while the scheme was being made available to 10,000 of the estimated 112,000 firsthome buyers each year, it could be expanded if the demand was there.

“If there is a greater demand for this scheme, we will be in a position to meet that demand,” he said. “I’d like to see more people on the first rung of the property ladder to realise their aspirations.”

Mr Morrison yesterday said the policy would be set up to encourage the smaller banks to lend to first-home buyers.

“We’ll be giving priority to those smaller banks and those non-bank lenders so we can encourage more competition in the market,” he said.

Housing Industry Association principal economist Tim Reardon said first-time home buyers would save plenty on mortgage insurance during the course of a loan.

“The savings are huge, and to consider that can be achieved with negligible cost to the government is a significant win,” Mr Reardon said.

He said mortgage insurance was a huge cost for first-home buyers, who typically borrowed more than 80 per cent of the cost of their home.

“One of the negatives associated with mortgage insurance is that you pay stamp duty on mortgage insurance as well so it continues to leverage up,” he said.

Lenders mortgage insurance provider Genworth – which wrote 60,000 policies in Australia last year – said it was blindsided by the Coalition’s proposed scheme but believed the policy would have little impact on its business.

“The scheme … is targeting a niche part of the market and has a number of restrictions,” Genworth CEO Georgette Nicholas said.

“It is also subject to income caps; restrictions on maximum loan size and only available to participating smaller lenders.”

REA Group chief economist Nerida Conisbee said the new policy was great for firsthome buyers and would have a much smaller impact on the property market than Labor’s proposed changes to negative gearing and capital gains tax.

She said Labor would limit negative gearing to new housing and halve the capital gains tax discount to 25 per cent.

“The problem with the negative gearing policy changes is that it also impacts investors and renters,” Ms Conisbee said.

I’D LIKE TO SEE MORE PEOPLE ON THE FIRST RUNG OF THE PROPERTY LADDER TO REALISE THEIR ASPIRATIONS SCOTT MORRISON