First-home buyers jump aboard plan to get foot in door

More than 5500 applicants for the federal government’s First Home Loan Deposit Scheme are already in their new homes.

More than 5500 applicants for the federal government’s First Home Loan Deposit Scheme are already in their new homes. Picture: iStock.

More than 5500 applicants for the federal government’s First Home Loan Deposit Scheme are already in their new homes, Nathan Dal Bon, chief executive of the ­National Housing Finance and Investment Corporation, says.

“Out of the 10,000 loan guarantee applications which were approved since the scheme began in January, more than 5500 are ­already in their homes,” he said.

NHFIC is overseeing the scheme for the federal government, which provides loan guarantees for eligible first-home buyers to buy a home with a ­deposit of as little as 5 per cent.

Under the system, NHFIC provides a mortgage insurance-like guarantee for the participating lender of up to 15 per cent of the value of the property purchased, which is financed by the first homeowner’s loan.

The scheme began in January when the government announced there would be a maximum of 10,000 loan guarantees made available until the end of June.

An additional 10,000 guarantees are being made available for the 2020-21 financial year, which started on Wednesday.

While the scheme helps first-home buyers to arrange their ­financing, it takes some time ­before the homebuyers actually buy their house and move in.

“We monitor how many people go from the pre-approval process to signing a contract,” Mr Dal Bon said,

“For the first-home buyer it could be around six months.”

Mr Dal Bon said the applications for the assistance had slowed down with the onset of the COVID-19 crisis, when there was rising economic uncertainty and housing sales dried up.

But he said it had picked up when the economy started to open up.

“When the COVID-19 epidemic began, we saw a moderation in terms of demand,” he said.

“It lasted through to March and early April.

“But then we started to see the demand for the assistance pick up again in May.”

Mr Dal Bon said some people who get approvals for assistance drop out of the system for various reason, including finding that they are still not able to buy a home they can afford.

But he said NHFIC was seeing a “high conversion rate from people moving out of the preapproval process to the stage of signing a contract to buy a house.”

He said NHFIC statistics showed that about 58 per cent of the applications were coming from single people, with most of the under the age of 30.

Mr Dal Bon said it was still too soon to assess how young homebuyers in general might be affected by the economic downturn.

He said this was because many banks had provisions where people could take advantage of repayment holidays of up to six months, which were still in place.

“We are still in repayment holidays,” he said.

He said it was “hard to predict” the impact of what could happen when the repayment holidays ended.

“How it flows through to people’s ability to service their loans will be the key issue.”

The impact on young homebuyers would also depend on whether they were hit by unemployment, a factor which could become more apparent in future months.

“Unemployment is always a bit of a lagging indicator of when the economy is easing,” Mr Dal Bon said.