Industry experts weigh in on scheme's pros and cons
The expanded First Home Guarantee, which allows first-home buyers to enter the property market with low deposit and fewer restrictions, comes into effect today. While the scheme promises greater access to homeownership, industry leaders remain divided on its potential impact.
According to a report from property platform Domain, the changes are expected to benefit potential home buyers by significantly reducing the time to save a home deposit.
Under the revised scheme, eligible buyers can now purchase with a 5% deposit, with the government guaranteeing up to 15% of the property’s value. This removes the need for lender’s mortgage insurance (LMI), eliminating a substantial upfront cost for many households.
The policy also lifts previous income caps and place limits, broadening access to the scheme. For some, the changes represent a positive step.
“For first-home buyers, the launch of the government’s 5% deposit scheme is welcome news, opening up more opportunities for Australians to take their first step onto the property ladder,” said Adam Brown (pictured top, far left), executive – broker distribution at NAB. “NAB is proud to support this scheme, helping first-time buyers turn their home ownership aspirations into reality.”
Brown added that the expanded scheme is expected to boost market activity and create new opportunities for mortgage brokers. “With activity in this segment likely to pick up, it’s a timely opportunity for brokers to engage with first-home buyers, guide them through the scheme, and provide support throughout the purchasing journey,” he pointed out.
Anthony Waldron (pictured top, second from left), chief executive of Mortgage Choice, echoed this view. “Competition in the market is likely to ramp up,” he said. “The increase in the scheme’s property price caps and the removal of income limits means Australian first-home buyers can now buy their first home with only a 5% deposit and save tens of thousands on LMI.”
David McQueen (pictured top, second from right), chief executive of Loan Market, said they have already noted a surge in interest from prospective buyers, with brokers receiving an increase in enquiries from first home buyers since the prime minister announced changes to the First Home Guarantee scheme were being brought forward to this day instead of Jan. 1. Increased price caps across different markets and the removal of income thresholds on the scheme will create greater choice for first-home buyers, he added.
“First-home buyers seek guidance through the borrowing and purchasing process and trust brokers to partner them in their journey,” McQueen said. “Building a deposit has been the biggest challenge for first-home buyers following COVID-driven property price rises and increased inflation. The scheme’s 5% deposit offering will be welcomed by those looking to break into the market.
“It’s incumbent on brokers to help first-home buyers make a sustainable transition to ownership, acting in the client’s best interests during their purchase and beyond.”
Some analysts, however, urge caution for borrowers entering the market with minimal equity.
“The expanded Home Guarantee scheme will open the door for thousands more Australians to get into the property market sooner, but it’s vital buyers understand what they’re signing up for when they purchase with just a 5% deposit,” said Sally Tindall (pictured top, far right), data insights director at Canstar.com.au.
“This scheme takes LMI off the table, which can be a roadblock for many first-home buyers. However, that doesn’t make a wafer-thin deposit risk-free. A smaller deposit typically means a bigger loan, higher monthly repayments and potentially a higher interest rate.”
Tindall also warned that the scheme’s expansion could have unintended consequences. “The expected increase in demand is likely to add more fuel on to a red-hot property market, pushing home ownership further out of reach for generations to come,” she said.
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