As first home buyer needs
continue to evolve, it is important that a range of stakeholders – both public
and private – work together to develop solutions that complement each other and
continue to support the Australian dream of homeownership.
Last week, the government introduced
legislation to implement the First Home Loan Deposit Scheme, a key part of its
federal election campaign earlier this year.
The scheme helps first home buyers
enter the property market sooner, by providing 10,000 eligible Australians per
year access to a home loan with a deposit of as little as 5%. The legislation
outlines income tests to assess first home buyer eligibility in the program, as
well as modest dwelling price limits.
To implement the scheme, the National
Housing Finance and Investment Corporation (NHFIC) will contract with a
panel of lenders rather than ever having direct contact with borrowers. As
such, lenders or mortgage brokers will assess scheme eligibility alongside
the normal considerations of seeing a borrower through the loan process, such
as loan serviceability tests.
Therefore, the scheme has compliance
costs for lenders and mortgage brokers, estimated at $2.17m per year.
Lenders, before offering the guaranteed
loans, will need to update their internal systems and train front-line lending
staff, including on how to apply the eligibility criteria.
Non-participating lenders will not face
any additional regulatory costs, and lenders are able to choose to participate
only if they feel that the commercial benefits of participating in the scheme
offset the associated regulatory costs.
For mortgage brokers to offer the
guaranteed loans to clients, it will require training or self-education, the
details of which have yet to be provided.
The legislation also establishes a
research function of the NHFIC to examine housing demand, supply and
affordability within Australia.
Since preliminary consultations were
initiated in late May 2019, a broad range of stakeholders in the home loan
process including lenders, industry associations, mortgage brokers and
financial regulators have been able to weigh in.
The Customer Owned Banking Association
(COBA) has welcomed the legislation.
CEO Michael Lawrence said, “There are
many customer-owned banking institutions that are eager to be a part of this
scheme after the Government said it would prioritise smaller lenders to help
boost competition.
“Customer-owned banking institutions
have a long tradition of helping first homeowners enter the property market.
“Australia’s customer-owned banking
institutions are excited to work with Government to help more Australians enter
the property market."A recently published survey has illuminated how the
dramatic movements in housing values over the past five years have reshaped the
Australian first home buyer (FHB) market.
The Genworth FHB Sentiment Report,
conducted in June and July across 2,000 prospective FHBs and 1,000 recent FHBs,
showed that rather than pursuing the traditional Australian dream of owning a
property for a lifetime, survey participants have “a more pragmatic approach”
to enter the market with an “entry level” property and upgrade down the
road.
Around one in three (32.3%) prospective
FHBs plan to sell their first property within five years, with the trend even
more pronounced in Sydney (39.5%) and Melbourne (36.3%).
As a result, free-standing homes are
being overtaken by small apartments as the most popular property among FHBs,
with investment properties also becoming more prevalent among those looking to
enter the market. One in six prospective FHBs plan to buy an investment
property as their first home, as compared to one in ten among the recent FHB
respondents.
In order to capitalise on the
opportunity seen in the current market, around 60% of prospective FHBs plan to
buy now with less than a 20% deposit as compared to the 47.4% of recent FHBs
who bought their first property with less than a 20% deposit.
To bridge the gap, 75.1% of prospective
FHBs plan to apply for the government’s First Home Loan Deposit Scheme, 27.5% expect
to ask their family for assistance and 15.8%
plan to use lenders mortgage insurance (LMI).
Of the recent FHBs, around 70% reported
they did not fund 100% of their deposit from their own savings, with the
majority (56.9%) relying on family assistance and 35.6% utilising LMI.
“Dynamic market conditions are
resulting in changing first home buyer behaviour and needs,” said Genworth CEO
and MD Georgette Nicholas.
“To address the increasing demand for
‘entry-level’ first homes which are held for less than five years, we recently
announced a new monthly premium LMI offering in addition to our current single
upfront premium product.
“This offering provides borrowers with
the option…to pay the LMI premium in instalments over time, which means a
greater portion of their loan can be utilised to support the purchase of their
first home.”
The new monthly premium LMI also gives
borrowers the flexibility to refinance at a later date without the need for a
refund of LMI premium.
“As first home buyer needs continue to
evolve, it is important that a range of stakeholders – both public and private
– work together to develop solutions that complement each other and continue to
support the Australian dream of homeownership,” said Nicholas.
姬琳达珍 Debello (LREA)
LJ Gilland Real Estate Pty Ltd
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