Brokers welcome scheme boost for first home buyers

by Jayden Fennell 12 Apr 2022

Mortgage brokers have welcomed the expansion of a scheme to help first home buyers enter the market.

The federal government’s First Home Guarantee scheme allows first home buyers to purchase property with a 5% deposit, with the government guaranteeing the remaining 15% so no lenders mortgage insurance (LMI) is required.

Shore Financial senior credit adviser Greg Bishop (pictured) said the initiative would benefit first home buyers foremost and enable them to get into the market sooner.

“If first home buyers no longer need to pay LMI on top of saving a deposit at the minimum of 5%, that premium disappears and buyers could potentially pay an even higher purchase price (depending on their location and price caps),” Bishop said.

“By pushing for that extra money saved for the buyer’s pocket to spend on their home without LMI or stamp duty costs, they might be able to afford a better property now and they won’t need to sell or upsize in a few years’ time.”

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The scheme also removes stamp duty costs as another incentive to assist eligible first home buyers. The government has just announced another 50,000 places for eligible Australians from 1 July 2022 to 30 June 2025. 

Bishop said he dealt with lots of first home buyers and, when possible, he presented the scheme as an option to those who qualify.

“Sometimes clients come to me assuming they are eligible for the scheme, however they do not know the full extent including price parameters, income thresholds, or the fact they need to be an Australian citizen,” he said.

Bishop said while there was no real disadvantage to the scheme for any qualified buyers, the only pinch point was the $800,000 price cap in NSW, which could hold people back.

“That purchase price limit can be challenging in a competitive market. Not only are these buyers dealing with others who have positions on the scheme but everyone else including second and third home buyers, investors etc.,” he added.

“It has made that price point very competitive with a lack of stock in the space providing the biggest disappointment for some people.”

Mortgage Advice Bureau Brisbane managing director Tracey Kearey also had contact with many first home buyers and said she understood that brokers need to regularly communicate and keep these clients interested and engaged.

“A first home buyer can become a second, third, or fourth home buyer. As brokers we need to help these buyers along the whole journey,” Kearey said.

“The house is the dream, and the finance side goes along with it, but we try to take as much pain out of that as we can – just because someone isn’t ready now, doesn’t mean they won’t be in the future.”

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Kearey said she supported the First Home Guarantee Scheme as it stimulated the economy and people spending money on property supported multiple industries.

“We need people to keep entering the market. The Australian home ownership statistic currently sits at – 10% are first home buyers, 30% mortgage payers, 30% encumbered and 30% investors,” she said.

Kearey said she set realistic expectations and goals with her first home buyers before helping them achieve their home ownership goal.

Mortgage Advice Bureau designed the Nurture Program for first home buyers who might not have enough savings today but can unlock savings milestones through the tech platform to keep on track and accountable.

“Through the Nurture Program we can show our clients the mountain might not be as high,” Kearey said. “It is so exciting telling our first home buyers their finance is approved and here are the keys to their new home.”