Should first-home buyers use government incentives
Government incentives for new buyers are expanding — but there are questions as to whether they should be used. Read more in our First Home Buyers Bible.
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Government incentives for new buyers are expanding — but there are questions as to whether they should be used.
A last-minute election campaign promise by the Coalition to guarantee 15 per cent of first-home buyer deposits is set to kick off in January and is expected to be in strong demand.
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The government’s existing incentive, the First Home Super Saver Scheme, has failed to set the homebuying world on fire since it launched in 2017.
The scheme lets people contribute up to $30,000 into their super fund, benefit from its low-tax environment, then withdraw the money — plus its earnings — later for a home deposit.
New Tax Office data shows that last financial year it approved 4189 release requests from the scheme. That’s about 4 per cent of loans for first-home buyers, and the ATO says the average released amount was around $12,000.
Mortgage specialist Lisa Montgomery said the lack of interest in the scheme suggested its benefits were not big enough to attract many savers.
“When you are looking at buying your first home it’s such a massive decision you are making. When you think about the emotional and psychological hurdles, this scheme seems inconsequential and insignificant.”
The new First Home Deposit Scheme is expected to attract much more interest from savers, who usually require a 20 per cent deposit to avoid paying costly Lenders Mortgage insurance.
The scheme will guarantee 15 per cent of that deposit, meaning savers only need to stump up 5 per cent.
It will be limited to 10,000 borrowers earning less than $125,000 a year ($200,000 for a couple).
Critics have warned that it may lead to riskier borrowing and potentially push up prices beyond the reach of buyers.
Originally published as Should first-home buyers use government incentives
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