Australian first home buyers will be able to finance a property purchase with a five per cent deposit – regardless of which major political party wins the federal election on May 18.
Most banks require buyers have a minimum deposit of 20 per cent – or charge mortgage insurance.
In a surprise windfall announced yesterday and which places property on the radar in the last week leading up to the election – the Liberals have promised to underwrite the shortfall first home buyers need to save, to meet the bank’s minimum requirement for a deposit. The ALP immediately matched the offer.
Commentary since the $500 million announcement yesterday has varied – from it being a solution to a slump in off-the-plan sales, through to it being economically irresponsible, and risky for home-buyers, who might not be able to support a mortgage and costs associated with home ownership. Mortgage insurance providers will be affected.
There are also concerns the initiative might push up property values. A year-2000 policy that gave $7000 and $14,000 rebates to first home buyers, was followed by a real estate boom lasting until the September 11, 2001, terrorist attacks.
Yesterday Mr Morrison said banks would still be required to do “all the normal checks on the borrowers to make sure they can meet repayments”.
He also said the plan could halve time it takes for a first home buyer to save for a home.
In practice, it is expected a bank will consider prospective buyers with a 5 per cent deposit as more of a risk that it would a buyer who has saved a 15 per cent.
The offer will be eligible to first home buyers with an income of up to $125,000. A couple of first home buyers can earn a household incoming totalling $200,000, and still be eligible to buy a property with a five per cent deposit.
It will be capped at 10,000 loans per annum.
Metricon New South Wales general manager Luke Fryer described the proposed policy as a master stroke adding that it would mean Australians “have more options on what and where they can buy, and get them in their home sooner”.
The Coalition would be looking at starting the initiative in January 2020.
The idea is based on one already in place in New Zealand.
Some of the ALP’s proposed policies relating to property, along with its release of negative gearing changes, based on inaccurate modelling, have caused many within the industry to back Scott Morrison on social media.
Last month, former Prime Minister John Howard OM AC questioned whether the low-point of the current property cycle was a time to be proposing ideas such as the ALP’s, to limit negative gearing.
Mr Howard likened the Opposition’s position as like “pushing a drowning man under the water” after acknowledging that housing values have been lessening.