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First home buyers can now apply for the government’s deposit scheme

First home buyers can now apply for the government’s deposit scheme

About 20 banks and financial institutions are now accepting applications to partially guarantee the deposit buyers would use to secure a mortgage on their first home.

The 10,000 applicants will be able to pick up a property with a deposit as small as 5 per cent, and they won’t have to worry about saving extra for lenders mortgage insurance (LMI), a fee usually charged on deposits below 20 per cent as the scheme guarantees the difference.

This is the second 10,000 quota to be guaranteed by the government this year, after an original batch opened up on 1 July. The additional placements are part of the government’s COVID-19 stimulus measures, together with HomeBuilder and JobKeeper.

“From today, first home buyers will be able to apply to First Home Loan Deposit Scheme lending panel lenders to secure a guarantee to build a new home or purchase a newly built home with a deposit of as little as five per cent,” Michael Sukkar said, minister for housing.

“These additional guarantees will … drive more construction and support jobs in the economy at a time it’s needed most.”

There’s 20 banks accepting applications for the First Home Loan Deposit Scheme from today, while a further seven will begin accepting applications from 9 November. (The full list of banks and financial institutions participating in the scheme can be found at the bottom of this article.)

New conditions require budding buyers to snap up new or newly built homes, but there’s also been a lift in the pricing caps for major cities.

Sydney and Melbourne’s caps increased by $250,000 to $950,000 and $850,000 respectively, while Brisbane’s increased by $175,000 to $650,000.

StateCapital city/regional centre – new capCapital city/regional centre – previous capRest of state – new capRest of state – previous cap
NSW$950,000$700,000$600,000$450,000
VIC$850,000$600,000$550,000$375,000
QLD$650,000$475,000$500,000$400,000
WA$550,000$400,000$400,000$300,000
SA$550,000$400,000$400,000$250,000
TAS$550,000$400,000$400,000$300,000
ACT$600,000$500,000N/AN/A
NT$550,000$375,000N/AN/A

Source: Federal Government

First home buyers signed a third of last month’s mortgages

First home buyers are accounting for a larger proportion of new mortgage commitments, data from the Australian Bureau of Statistics (ABS) reveals.

There were 13,040 first home buyer loan commitments in September, according to seasonally adjusted data, an increase of 6 per cent.

But this accounted for 34.5 per cent of all owner occupier commitments for the month, Amanda Seneviratne said, head of finance and wealth at the ABS.

“Owner occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives,” she said.

Housing Minister Michael Sukkar said the increase had pushed the number of first home buys to a long forgotten high.

“... First home buyers are flooding into the housing market, with the number of loans to first home buyers reaching the highest number in over a decade,” he said.

Another government scheme accounted for an even greater share of new mortgages. The ABS said the government’s Homebuilder scheme accounted for about half of the $17.3 billion spent on owner occupier loans.

First home buyers can also take advantage of the HomeBuilder scheme, provided they meet the eligibility criteria.

Buying into the market four years quicker

The government’s role in guaranteeing part of a 20 per cent deposit has helped first home buyers enter the market years earlier, according to a federal government agency.

The National Housing Finance and Investment Corporation’s (NHFIC) initial report into the first home loan deposit scheme found people were able to buy their first home four years earlier on average.

In New South Wales, it helped them shave five years.

This is because they can secure a home with a deposit one-quarter of the size, while also not having to save extra to cover LMI -- a tax paid to banks that can cost several thousand dollars.

There is a downside to buying a property with a smaller deposit, however. The interest being calculated on a bigger loan will ultimately result in more money being spent on servicing it, Sally Tindall said, research director at RateCity.

“For most lenders, a deposit that falls short of 20 per cent means you’ll have to fork out for LMI which can run well over $10,000,” she said.

“It also means your monthly repayments will be higher and you’ll pay more in interest over the life of your loan.”

Company
Product

Star Gold Home Loan

Real Time Rating™

3.23

/ 5

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Interest Rate

2.44

% p.a

Variable

Comparison Rate*

2.49

% p.a

Repayment

$1,337

monthly

Real Time Rating™

3.23

/ 5
Go to site

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Company
Product

Green Home Loan

Real Time Rating™

2.76

/ 5

Winner of Best Green Home Loan, RateCity Gold Awards 2022

Interest Rate

2.63

% p.a

Variable

Comparison Rate*

3.05

% p.a

Repayment

$1,366

monthly

Real Time Rating™

2.76

/ 5
Go to site

Winner of Best Green Home Loan, RateCity Gold Awards 2022

Company
Product

Standard Variable Home Loan

Real Time Rating™

3.32

/ 5

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Interest Rate

2.49

% p.a

Variable

Comparison Rate*

2.49

% p.a

Repayment

$1,344

monthly

Real Time Rating™

3.32

/ 5
Go to site

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Lenders accepting first home loan deposit applications from today

Australian Military Bank

Defence Bank

P&N Bank

Australian Mutual Bank

G&C Mutual

People’s Choice

Bank Australia

Gateway Bank

QBank

Bank of Us

IBA Group

Qld Country Bank

Bendigo Bank

The Mutual

Regional Australia Bank

Commonwealth Bank

MyState

WAW Credit Union

Community First

National Australia Bank

Lenders accepting first home loan deposit applications from 9 November 2020

Auswide Bank

Credit Union Australia

Police Bank

Bank First

Mortgageport

Teachers Mutual Bank

Beyond Bank

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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