First Home Guarantee scheme buyers getting ahead on property ladder

New research shows one in five first home buyers who were helped onto the property ladder with the help of the federal government’s Home Guarantee Scheme have transitioned out of the program, with many leveraging their equity.

Around 63 per cent of all first-home-scheme-backed homeowners are ahead on their mortgages.

One in five home buyers who took advantage of the federal government’s low deposit loan guarantees since have transitioned out of the scheme, new research has revealed.

More than 19,000 loans secured under the Home Guarantee Scheme with deposits of as little as 2 or 5 per cent have graduated out of the assistance since its introduction in 2020, according to Housing Australia’s latest Trends & Insights Report for the last financial year.

Of those homeowners, around 60 per cent had either paid more than 20 per cent of their home’s value, or had leveraged their accumulated equity from rising property prices to refinance to another lender.

Around 63 per cent of all scheme-backed homeowners are ahead on their mortgages, with only 0.1 per cent of loans under the scheme in arrears and 1 per cent of the portfolio have accessed hardship support.

Housing Australia administers the scheme on behalf of the federal government. Chief program officer of home ownership, Jennifer Chew, said, it was “incredibly rewarding” to see Australians empowered to achieve the dream of home ownership sooner.

“Amid rising living costs and housing affordability challenges, the Home Guarantee Scheme has supported thousands of eligible home buyers to navigate the market and achieve home ownership sooner,” Ms Chew said.

“The strength of the Scheme is further demonstrated by the number of participants that have transitioned out of the Scheme due to equity built up.”

Amid higher interest rates, cost of living pressures and moderate to strong property price growth, a third of first home buyers took advantage of the scheme last financial year, equating to 58,000 Australians helped into their own home.

Almost nine in 10 (88 per cent) of the 50,000 home guarantees were used, a rise of 34 per cent compared to last financial year.

The scheme was introduced by the Morrison Government in January 2020 to help 10,000 first time buyers each financial year into a modest home and onto the property ladder with a deposit of just 5 per cent.

In November that year, another 10,000 space were offered for those who built new home and in July 2021, 5,000 single parents were able to buy with a deposit of as little as 2 per cent.

The Albanese Government expanded the popular First Home Guarantee to 35,000 spots and introduced the Regional First Home Buyer Guarantee, for 10,000 buyers outside of capital cities. It also allowed friends and family members to buy together.

All variations of the scheme have income and property price caps that must be met.

Last financial year, Victorians secured more guarantees (28 per cent) than any other state territory, helped into the market by falling property prices. Nationally, the top three areas for home buyers were the other Melbourne suburbs of Hoppers Crossing, Craigieburn and Cardinia.

Queensland and Western Australia also recorded robust take-up of the scheme, securing 24 per cent and 15 per cent of all guarantees respectively.

More joint-purchases were made last financial year, with the age and income of guarantee users rising, likely reflecting the higher costs in servicing a mortgage.

The typical borrower was in their early 30s. A single borrower earned an average of $85,000 and bought a home valued at $482,000. Dual borrowers, which represented six in 10 of purchasers, had an average household income of $134,000 and spent $624,000 on their property.

A quarter the guarantees – 11,000 spots – were secured by key workers such as teachers, nurses and social workers.

Housing Industry Association managing director Jocelyn Martin said the evolving scheme is having the desired impact.

“These positive inroads into improving housing outcomes, prove what we have said all along, that these types of Schemes work and should be expanded and supported for those who want to achieve the Australian dream of owning their own home can do it,” Ms Martin said.

The New Home Guarantee was not available last financial year.