More help for those seeking to buy their first home

The federal government is ramping up efforts to enable more young families, couples and singles to get a foot on the property ladder.

The new financial year sees a whopping 35,000 new places released under the government’s First Home Guarantee (FHBG), up 250 per cent from 2021-22. The Sydney price cap has also been lifted to $900,000 and, for Melbourne, $800,000 – up $100,000 on the previous financial year.

An expansion in the number of places in the federal government’s low-deposit schemes comes as rents surge. Credit:Paul Rovere

Under the scheme, first home buyers can put down a deposit of just 5 per cent to buy a new or existing home.

Five more lenders are participating in the scheme this financial year, taking the number to 25 non-major lenders, plus National Australia Bank and the Commonwealth Bank.

The expansion of the FHBG scheme comes at a time when capital city rents rose an average 15.6 per cent for the year to June 15, figures from SQM Research show, and the national residential property rental vacancy rate plunged to a 16-year low of just 1 per cent in May.

Saving for a home deposit is one of the main obstacles to achieving home ownership. A recent survey of first home buyers by Finder found more than a one-third took more than five years to accrue enough funds.

Kristin Brookfield, of the Housing Industry Association, says the added FHBG places offer much-needed help to those looking to buy their first home.

‘A first home buyer is facing years to save a deposit and, in that time, they risk being priced out of the market.’

“With the current cost pressures on households, a first home buyer is facing years to save a deposit and, in that time, they risk being priced out of the market,” she says.

There are also 5000 new places available this financial year in the Family Home Guarantee (FHG), through which eligible single parents with at least one dependent child can buy a home with a deposit of only 2 per cent. They can be former owner-occupiers who are looking to re-enter the housing market.

The purchase price caps are the same as for the First Home Guarantee. Both schemes are restricted to those earning up to $125,000 a year. For the FHBG, couples can earn up to $200,000 combined.

The schemes enable home buyers to avoid paying expensive lenders’ mortgage insurance, which can be tens of thousands of dollars for those borrowing more than 80 per cent of a property’s purchase price.

Two other schemes that Labor promised during the federal election campaign are in the process of being implemented.

There will be 10,000 places in the Regional First Home Buyer Support Scheme and 10,000 places in the “Help to Buy” scheme, where the federal government co-purchases a home with the buyer.

First-home buyers can save for a deposit via their superannuation, where money that is earmarked for the purchase of property benefits from concessional tax rates inside super funds.

However, with property prices likely headed lower, buyers who put down only a small deposit have been warned they could find themselves in “negative equity”, where the mortgage is larger than their home value.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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