Let first home buyers access super funds, lender says

by Calida Smylie22 May 2014
Borrowers should be able to access their superannuation to overcome the upfront costs of buying a first home, a South Australian lender believes.

HomeStart Finance put forward the idea to the Senate Inquiry on Affordable Housing to help tackle the dearth of first home buyers.

The scheme is based on the successful Canadian Home Buyer’s Plan, which allows first home buyers to withdraw C$25,000 from their super fund to buy or build a home to live in – on condition the money is repaid to the super fund within 15 years.

HomeStart gave an example: A new graduate entering the workforce perhaps on a wage of $50,000 per year would be expected to accumulate over $30,000 in super in their first six years of working. If they were to access $20,000 of these funds and then repay this amount over 15 years then 20 years later they would have significant equity in their own home, and have almost $360,000 in super.

The impact of withdrawing the funds means the person would, after 20 years have about $23,000 less super than if they had not withdrawn the funds.

CEO John Oliver believes such a scheme in Australia would be best suited to first home buyers.

“It is ironic that a household in difficulty with their mortgage has the option to access superannuation to clear arrears, whereas a first home buyer in an otherwise good financial condition cannot temporarily access their super for a deposit and then replenish those funds over an extended period as occurs in Canada,” he said.

Oliver said making home loans accessible to all segments of the community was a key ingredient to lifting home ownership rates and boosting the economy.

“We urge the Senate Committee to consider the success of existing home ownership assistance models in Australia like HomeStart that accept lower deposits, a wider range of income sources for loan servicing, and provide alternatives for paying lender’s mortgage insurance,” he said.

“Approximately 80% of our customers are unable to get a loan from mainstream sources, but our experience proves this segment of the community can be successful home buyers.”

HomeStart, a statutory authority which reports to the South Australian government, suggested the nation should copy its successful home ownership assistance model.

Since it was started 25 years ago it has settled more than 64,500 loans and manages a loan portfolio of $1.9 billion.

“Nationally, affordable housing policy typically leaves the provision of finance entirely up to the private sector but there is strong evidence to prove that there are worthy areas of the market not covered by the private sector, and an organisation such as HomeStart makes an important contribution in meeting those needs,” Oliver said.

“At least half of our loans made to first home buyers are refinanced which means that once a customer has spent a few years building equity and demonstrating a repayment history with HomeStart, they become attractive for mainstream lenders whereas when they first came to us they were not.”

The lender also suggested the inquiry consider ways in which stamp duty could be deferred until property sale or financed in a way similar to university tuition fees.

The results of the inquiry will be released in June.


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  • by Peter 22/05/2014 9:44:26 AM

    I can't imagine too many first home buyers with 25k in their super. Mostly the clients I have dealt with are young, meaning they have not been in the workforce long enough to build a deposit type of balance. Also, if they have to pay it back to the super fund over 15-20 years we are now banking on them having growth in the property value and not paying minimum payments? speculative outcome really. My opinion, if the government could open a department to supply LMI and reduce the fees to a decent premium that is based on risk across the quantity of LMI deals, this would be a great first step. Really, I want to be a Mortgage Insurer when I grow up. Money for jam really. In addition to this, reducing to 50% if not abolishing stamp duty for FHOG is also critical if they really want to see growth from this area of the market. My 2 cents worth.

  • by Benno 22/05/2014 11:42:46 AM

    Sometimes old fashion principals result in old fashion behavior, if first home buyers can’t save for a deposit now how are they going to afford a home loan repayment. I agree with Peter consideration to the cost issue would be more beneficial than raiding a future savings pool. And Mr Oliver if your proposal involves compulsory enforcement of the repayment then this would come at a cost to someone and it was the costs that are the problem in the fist place isn’t it?

  • by John from Geelong 22/05/2014 1:01:28 PM

    Withdrawal from super is not the correct solution but securing against your super with a withdrawal only in the event of a loss to the lender is better.
    It may need concessional treatment of additional payments to super when young to create enough value in the fund to be useful.
    Simply put, super is forced saving and should be available to support your first step into the property market.
    Some people will take advantage of the scheme but that shouldn't detract from the vast number of clients who benefit from it. It will also provide an opportunity for the plodder who always stays employed but can never manage to set aside enough for a deposit. There are plenty of people in their 30s and 40s who can't find a way in.