Home scheme to keep loans fair for buyers

First-home buyers under a new deposit scheme will access loan prices ‘in line with or better than’ deals currently on offer.

Housing Minister Michael Sukkar. Picture: AAP

First-home buyers entering the market under the government’s new deposit scheme will access loan prices “in line with or better than” deals currently on offer from lenders, according to the agency charged with administering the program.

The First Home Loan Deposit Scheme was a key election pledge by Scott Morrison a week out from his May 18 election victory, with the initiative aimed at allowing first-home buyers to enter the market with deposits as low as 5 per cent.

The National Housing ­Finance and Investment Corporation has rejected suggestions some banks will be able to charge higher interest rates to low-­deposit users of the scheme to ­reflect a greater risk of default, ­arguing this will not be permitted.

It said lenders seeking to participate in the scheme had indicated a willingness to price home loans competitively and that the “competitiveness of loan products offered — including interest rates and other fees — is a key evaluation criterion for selection as a participating lender”.

“The NHFIC has been working intensively with stakeholders on the FHLDS establishment,” it said. “This has included a detailed market sounding process which provided useful feedback on the operation of the scheme, including potential pricing outcomes.

“The process revealed that a variety of lenders intend to offer FHLDS guarantee loan pricing in line with or better than comparable first-home buyer loans currently offered.”

Housing Minister Michael Sukkar said the government “made no apologies for ensuring that first-home buyers get the best possible pricing and loan terms”. “Loan pricing is a key evaluation criteria that NHFIC will consider in selecting the final panel of FHLDS lenders,” he said. “Pleasingly, many lenders have already committed that, if selected, they will price FHLDS loan products either equally or more competitively than existing comparable products.”

Under the scheme, the government would cover the difference between the lower deposit of 5 per cent and the 20 per cent of the value of the property and is ­intended to give preference to smaller banks and non-bank lenders to boost competition.

The program is available to ­individuals with an income of up to $125,000 or a couple with $200,000. Property price caps apply under the scheme, with ­eligible properties in Sydney limited to those under $700,000 and $600,000 in Melbourne, while the threshold in the ACT is set at $500,000. The program will support up to 10,000 loans each ­financial year, starting from January 1.