First Home Loan Deposit Scheme of Morrison Government

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First Home Loan Prime Minister Scott Morrison in an election campaign launch at Melbourne on Sunday, May 12, 2019, has outlined a major policy change to help the first home buyers. This proposal is a significant departure from previous attempts to help younger people trying to get into the housing market.

This plan is a masterstroke to set in a long overdue level playing field for the first home buyers and investors on the one hand and blunt the ALP’s anti-negative gearing rant.

This is a commendable and ingenious policy initiative, it will definitely have an edge during the last week of the coalition campaign.

Mr. Morrison said a re-elected Coalition government would set up a scheme to offer loan guarantees for first home buyers so they could buy their properties with deposits of just 5 percent of the price.

The government intends to borrow $500 million so it can invest the money in the National Housing Finance and Investment Corporation, which would offer the guarantees to aspiring home-owners.

The scheme would be capped at 10,000 loans every year, about one-tenth of the market given estimates that there were about 100,000 loans to first-home buyers last year.

The National Housing and Investment Corporation would support the buyers for the life of their home loans or until the value of the property rises to a point where they choose to refinance.

This scheme would give preference to working with the smaller banks and non-bank lenders to boost competition. They would still do all the normal checks on the borrowers to make sure that they can meet their repayments, this isn’t free money.

The scheme will be available to first home buyers with an income of up to $125,000 or a couple with $200,000 where they are both first-home buyers.

The support would stay in place for the life of the loan, and when they refinance in a few years’ time, when the equity increases, which it will eventually, then that’s when the guarantee ceases.

The proposal takes on Labor over property prices and younger Australians, as Opposition Leader Bill Shorten seeks to raise $32 billion over ten years from changes to negative gearing and capital gains tax but plays down the impact of his policy on the real estate market.

The new policy, called the First Home Loan Deposit Scheme, will be available from January 1 for those who have saved at least 5 percent of the value of the home, but it will also be subject to limits for each market.

The value of homes that can be purchased under the scheme will be determined on a regional basis, reflecting the different property markets across Australia and a cap will apply on the homes that would qualify.