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17 October 2019
The federal government’s First Home Loan Deposit Scheme will guarantee mortgages for first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance premiums.
Legislation cleared the Senate on Monday to deliver on the coalition’s election promise, which had bipartisan support.
Eligible buyers will be able to enter the market without having the standard deposit of 20 per cent under the scheme.
An income threshold will apply for applicants. Singles earning up to $125,000 and couples with a joint income of $200,000 will be eligible if it’s their first home loan and they are both first home buyers.
Support will stay in place for the life of the loan. If the borrower refinances to a new loan or lender, the guarantee will end. The government can guarantee deposits through the National Housing Finance and Investment Corporation from the start of next year.
Independent senator Jacqui Lambie criticised the scheme for lacking detail and doing nothing to address housing affordability.
Assistant Financial Services Minister Jane Hume said the scheme wasn’t about making housing cheaper.
“The aim of this scheme is to allow first home buyers to enter the market with only a five per cent deposit,” she said.
Labor backed the scheme and succeeded in changing the bill to have the scheme reviewed once a year rather than every three.
The legislation will return to the House of Representatives for final approval.