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What we know so far about the new First Home Buyer Deposit Scheme

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The Federal Government’s new First Home Buyer Scheme will permit a select number of Australian First Home Buyers the opportunity to secure a mortgage with only a 5% deposit. The scheme, which formed part of the Government’s election promise will be capped at 10,000 applicants across Australia every financial year, but as the initiative begins on January 1, there will be the double opportunity during 2020.

The deposit guarantee will mean that First Home Buyers will be able to buy property faster, having need only a deposit of 5%, rather than 10-20% - and with the Government deposit guarantee of up to an additional 15% this will mean that the purchaser will avoid additional costs on their loan, such as LMI (lenders mortgage insurance) which is an added cost on mortgages with a deposit amount below 20%.

Recently, the Federal Government has released more information about the scheme including regional pricing and income caps. The regional pricing cap is the set price that a First Home Buyer can purchase a property for and still receive the grant; whereas the income cap is the income wage level of singles or couples which will enable them to receive the scheme. For singles the income cap is $125,000 p.a; whereas for couples, $200,000 p.a.

Regional pricing caps are outlined below.

Table

Many Australian first home buyers now also eagerly await further details on how to apply for the scheme, with earlier reports identifying that the scheme will operate on a ‘first come, first served’ basis.

Blake Schulze, Director Project Marketing at Colliers International comments that “the new deposit scheme allows purchasers to enter the property market sooner by reducing the deposit amount – however, more information is still required about the scheme, such as how to apply. We see the scheme as benefitting the purchaser, and it has been reported that the offer can be taken up in conjunction with other Government initiatives such as the First Home Buyer Super Saver Scheme (FHBSSS), First Home Owner Grant (FHOG) and stamp duty relief and concessions.”

As a business we anticipate high uptake of the offer in Q1 2020 upon the schemes release date and specifically see the scheme benefitting Off the Plan sales as it would allow purchasers to make Financial/Savings plans so that they can: 1) deposit sooner on 5% and 2) begin saving towards their mortgage during the construction period – enabling them to pay down a higher percentage of their mortgage upon the property settlement.”

Colliers International will continue to provide further information regarding the new First Home Buyer Scheme as it becomes available.