A further 10,000 participants will be eligible for a government scheme which will help first-home-buyers to secure a loan with only a five percent deposit as the Federal Government moves to further stimulate new residential construction and economic activity.
Federal Treasurer Josh Frydenberg and Minister for Housing and Assistant Treasurer Michael Sukkar have announced an additional round of the Commonwealth First Home Loan Deposit Scheme.
The scheme allows first home buyers with a deposit of five percent or more to access a loan without needing to pay mortgage insurance which is typically applied to home loans that involve deposits worth less than twenty percent of the value of the property.
Under the scheme, the Commonwealth Government through its National Housing Finance and Investment Corporation (NHFIC) acts as a guarantor for participating lenders in respect of up to 15 percent of the value of the property being purchased.
Savings delivered can be substantial: a purchaser with a 10 percent deposit ($50,000) buying a $500,000 home, for example, would typically need to pay around $7,920 in mortgage insurance.
Price caps in respect of the new round have also been raised from $700,000 to $950,000 in Sydney and from $600,000 to $850,000 in Melbourne.
To ensure that expansion helps to stimulate new construction, the new round will only be available for purchases of a new or newly built home.
The new round will open on October 6 and conclude on June 30 next year.
The scheme’s extension comes as the home building industry faces several years of slow activity as COVID restrictions have brought immigration to a halt.
Building industry lobby welcomed the expansion.
“The scheme is a proven success story. Expanding it for new homes ticks all the right boxes to help us build our way to economic recovery,” Master Builders Australia chief executive officer Denita Warn said.
“Thousands of small builders and tradies are staring down the barrel of destruction. This move by the Government is going to help save jobs and keep businesses afloat.
“Boosting home ownership and residential building activity are among the most effective ways to fire up aggregate demand, which is exactly what we need right now.”