Single parent home scheme set to help no one in major cities

The budget unveiled a scheme allowing single parents to buy a home with as little as a 2 per cent deposit. This is why the idea won’t work.

Single parents in most major cities in Australia will not be able to afford a home or unit under the federal government’s new 2 per cent deposit scheme.

Inflated property prices and caps set below most median house and unit values mean the majority of single income parents won’t be able to access the Single Parent Family Home Guarantee (SPFHG) scheme.

Home loan experts have dubbed the scheme unrealistic, while the federal opposition say it will only assist a fraction of single parent families.

Latest property figures from CoreLogic shows the median house price in every major capital city is more than $100,000 above the house price cap under the scheme, while single parent buyers in Sydney and Hobart would not even qualify for a unit at median value.

The scheme was part of the federal government’s federal budget. Picture: Sam Mooy/Getty Images

In Sydney, the cap is $700,000 for existing dwellings, however April median house prices in the greater metro area stood at $1.47m and median unit prices were $771,859.

RateCity research director Sally Tindall said the proposed scheme was not the “white knight” for single parents to gain access to stable housing.

“This scheme has good intentions, however it does little to address the overarching issue of housing affordability in property hot spots around the country,” Ms Tindall said.

“Helping single parents get greater security around where they live is important but the property price caps attached to this scheme aren’t realistic for many single parents who need extra space for their children.”

An anticipated ongoing boom in property prices by the end of year will also mean the median unit value in Melbourne, Canberra and Perth exceeds the property price cap under the scheme.

RateCity research director Sally Tindall said the scheme was unrealistic. Picture: Supplied.

Currently, the median unit price in Melbourne is $599,234 which is just below the scheme’s $600,000 cap.

However, by the end of the year, Melbourne’s median unit price value is tipped to jump to $669,210.

The scheme allows a single parent to gain a mortgage with a 2 per cent deposit without needing lenders’ mortgage insurance.

The federal government guarantees the remainder of the deposit and will take the hit for that proportion of funds if a mortgage holder defaults.

SPFHG is an extension of the First Home Loan Deposit Scheme and has 10,000 spaces available over four years.

Labor’s spokesperson for women Tanya Plibersek says the scheme is “no help at all” and will not assist enough single parent Australian families.

“There are a million single parent families in Australia. This will help only 2500 a year for four years,” Ms Plibersek said.

“This policy is tiny. It’ll cost the budget just $300,000 — it’s too small and offers basically no help at all.

“Scott Morrison’s the classic ad guy, great at generating a headline, then he’s all like ‘T&Cs may apply’.”

Tanya Plibersek says the scheme is “no help at all”. Picture: NCA NewsWire/Gaye Gerard

According to RateCity, a 2 per cent deposit on a $700,000 mortgage with a 3.3 variable interest rate would attract a monthly repayment of $2941.

Using average weekly wages from the Australian Bureau of Statistics for a female private sector worker, a loan of this magnitude equates to roughly half of their monthly salary — just to service the loan.

Anticipated rises in interest rates in the next three years would also mean the amount of debt outstanding would increase.

Ms Tindall said a single mother on the average female wage would likely be unable to buy a median priced apartment in most cities without being in severe mortgage stress.

“Buying property with a wafer-thin deposit can be risky, especially in the face of rising interest rates,” she said.

“The bigger the loan people have, the more they are going to be impacted by interest rate rises down the track.”

The scheme is available for single parents earning up to $125,000 annually and the sole parent can be the only person listed on the title of the property and the loan.

It is available for existing or new dwellings and the person must not already own a property.

A new home application has a larger price cap than existing dwellings.

Minister for Housing and Homelessness Michael Sukkar said the government understood the importance of owning your own home.

“The Family Home Guarantee recognises that the challenge of saving a deposit is even harder when you’re on a single income while raising children, particularly if you are not eligible for first home buyer programmes,” he said.

“The Morrison government is committed to breaking down barriers for women leaving violent relationships and supporting them to create lifelong financial stability.”

He said the scheme worked alongside the record $1.1bn investment in women’s safety in the budget, which included a new payment up to $5000 to help women escape domestic violence and the extension of the Safe Places emergency accommodation program.