First home buyers are buying property years earlier using the First Home Loan Deposit Scheme
The Reserve Bank of Australia has kept the cash rate on hold as aspiring first homeowners crack into the property market a lot sooner than anticipated.
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Aspiring first homeowners have been able to crack into the property market four years sooner using a scheme that requires just a five per cent deposit.
The Reserve Bank of Australia board announced on Tuesday that it will keep the cash rate on hold at 0.25 per cent as many entry-level buyers rush in to buy their first property.
The Federal Government’s popular First Home Loan Deposit Scheme filled its first 10,000 last financial year, with around 70 per cent of all applicants purchasing a detached house. The majority of successful applicants were aged between 18 and 34.
Under the scheme eligible singles must have a taxable income in the 2019/20 financial year of less than $125,000, while couples must not earn more than $200,000.
Successful applicants only need a minimum five per cent deposit saved up — the government acts as a guarantor for the remaining 15 per cent.
This means the purchasers avoid the hefty lenders’ mortgage insurance – a cost that protects the lender not the borrower if there is a default on the loan.
Assistant Federal Treasurer Michael Sukkar said the government was doing what it could to “help Australians get into a home of their own sooner”.
“The scheme has helped cut up to four years off the time it takes Australians to take to save and buy their first home,” he said.
New figures showed single applicants were mainly in the 25-34 age bracket, earned between $60,000 and $80,000 and the median house price they purchased at was $370,000.
Couples were also predominantly in the same age bracket ,with an annual income between $90,000 and $125,000, and the median property purchase price was $425,000.
Bendigo Bank’s Head of Local Banking, Nick Carter, said they have been getting about 400 inquiries relating to the scheme per week.
“First home buyers are not competing with cashed-up property investors and overseas buyers so there’s opportunities there,” he said.
“The spring market period is about to kick off and there’s an opportunity for people to own their own home.”
But he warned spots in the scheme would run out “based on the rates of inquiries we are seeing”.
Many fixed and variable owner occupier rates are in the two per cent range and some lenders are even offering rates with a “1” in front.
Father-of-three Chris Lane, 42, said he had “almost given up hope” of home ownership after going through multiple failed attempts to get a home loan.
“During COVID-19 we were able to save more with less expenses such as children’s sport, commuting costs and eating out,” he said.
“We purchased an old church that’s been converted in a house.
“It cost $575,000 and we had saved a five per cent deposit.”
The National Housing Finance and Investment Corporation’s chief executive officer Nathan Dal Bon said the scheme had been incredibly popular since its rollout in January.
“Demand for the scheme in the six months to 30 June continued despite the onset of the COVID-19 pandemic,” he said.
“First time buyers across age and income spectrums around the country accessed the scheme and we saw strong interest from buyers in out metropolitan and regional areas.”
NSW
Number of guarantees issued: 2263
Number of settlements: 1809
Median property purchase price: $450,000
Median deposit paid by borrower: $29,250
Purchase price relevant to price cap: 79.9 per cent
Median buyer age: 28
VICTORIA
Number of guarantees issued: 1617
Number of settlements: 1270
Median property purchase price: $495,000
Median deposit paid by borrower: $29,250
Purchase price relevant to price cap: 82 per cent
Median buyer age: 29
QUEENSLAND
Number of guarantees issued: 1845
Number of settlements: 1508
Median property purchase price: $350,000
Median deposit paid by borrower: $20,000
Purchase price relevant to price cap: 76.1 per cent
Median buyer age: 28
WESTERN AUSTRALIA
Number of guarantees issued: 441
Number of settlements: 351
Median property purchase price: $335,000
Median deposit paid by borrower: $19,115
Purchase price relevant to price cap: 81.18 per cent
Median buyer age: 27
SOUTH AUSTRALIA
Number of guarantees issued: 332
Number of settlements: 283
Median property purchase price: $306,000
Median deposit paid by borrower: $18,250
Purchase price relevant to price cap: 77.8 per cent
Median buyer age: 27
TASMANIA
Number of guarantees issued: 138
Number of settlements: 112
Median property purchase price $:285,000
Median deposit paid by borrower: $15,500
Purchase price relevant to price cap: 86.2 per cent
Median buyer age: 26
ACT
Number of guarantees issued: 147
Number of settlements: 116
Median property purchase price: $442,000
Median deposit paid by borrower: $24,250
Purchase price relevant to price cap: 85.6 per cent
Median buyer age: 29
NORTHERN TERRITORY
Number of guarantees issued: 31
Number of settlements: 24
Median property purchase price: $340,000
Median deposit paid by borrower: $18,500
Purchase price relevant to price cap: 86.8 per cent
Median buyer age: 30
Source: National Housing Finance and Investment Corporation.
Originally published as First home buyers are buying property years earlier using the First Home Loan Deposit Scheme