Legislation to implement the federal government’s First Home Loan Deposit Scheme has now passed through the Senate after opposition amendments were made to incorporate a proper review of the scheme’s effectiveness.
The $500 million scheme is designed to provide first home buyers (FHBs) earning up to $125,000 ($200,000 for couples) with “a significant leg up” by making available to them 95 per cent, without the requirement to pay lenders mortgage insurance (LMI).
I can hear the FHBs ask, ‘wait, what’s Lenders Mortgage Insurance?’. This is an additional cost for buyers who borrow over 80% of their loan. This means if you’re a buyer and you don’t have a 20% deposit, your lender requires you to pay LMI on top of all the other fee’s associated with buying. This means in addition to other grants for FHBs, this is one less cost they need to worry about, making repayments much easier to manage for property newbies.
In addition to the legislation, which includes the amendment of the National Housing Finance and Investment Act 2018 to incorporate the functionality of the First Home Loan Deposit Scheme, was introduced to Parliament last month, and was officially passed through the Senate last week with minor amendments.
At this point, the bill does not include any real detail of the scheme. It does not include what the price caps will be nor does it provide any detail as to how it may differ regionally. So there seems to be some fine-tuning needed before it rolls out, but the whispers are that it will commence January 2020 if they can sort out the nuts and bolts by then.
This could mean that within the next 12 months, the scheme could potentially be used to guarantee up to 20,000 purchases.
There were further proposed amendments that will ensure this program is reviewed every 12 months, which were also approved and the bill was passed.
Commenting on the announcement, Minister for Housing and Assistant Treasurer Michael Sukkar said, “first home buyers will be able to enter the property market sooner after the Coalition Government passed new laws through the Parliament today to implement the First Home Loan Deposit Scheme, and the National Housing Finance and Investment Corporation’s new research function.”
He also stated, “the scheme complements other government initiatives to reduce pressure on housing affordability in Australia and support local communities”.
I’m really interested to see what the final details will be as this scheme could really assist our First Home Buyers to enter the market in what is a difficult market to enter. I will be monitoring the progress of this scheme and I can’t wait to share the final result with everyone.