First home buyers using the Home Guarantee Scheme have been able to lower their housing costs as they move from renting to owning, according to a new report.
The National Housing Finance and Investment Corporation has released a review of the scheme’s operations from its launch in January 2020 to the end of May this year, comparing first home buyers who used the HGS with the broader first home buyer market. The work was a collaboration with its major bank panel lenders Commonwealth Bank and NAB.
The Home Guarantee Scheme is made up of the First Home Guarantee and the Family Home Guarantee. Under the First Home Guarantee, an eligible first home buyer can purchase a property with a deposit of 5 per cent. To be eligible for the guarantee, individual income cannot exceed A$125,000 and a couple’s income cannot exceed $200,000.
The Family Home Guarantee supports single parents with at least one dependent child to buy a home, with a deposit of as little as 2 per cent.
The NHFIC will allocate 40,000 new places this financial year. In addition, the government is developing a new regional scheme that will offer 10,000 places.
The review found that the average purchase price of first homes generally was $564,000 and the average first home buyer loan $442,000 over the period from January 2020 to the end of May this year. The average deposit was $122,000.
For borrowers receiving assistance under the HGS, the average purchase price was $478,000 and the average borrowing $440,000. The average deposit was $34,000.
While borrowers accessing HGS borrowed more for a lower priced dwelling, the NHFIC data report a number of positive outcomes.
Most notably, their monthly housing payments were lower. Twenty-eight per cent of HGS participants’ income was used for mortgage repayments, compared with 31.6 per cent previously contributed to rent.
Some portion of those mortgage payments are mortgage principal payments, representing savings in the form of home equity.
Among other findings, the HGS supported proportionally more single women, compared with the broader first home buyer market. Buyers who accessed the Family Home guarantee were predominantly women with dependent children (84 per cent).
Given the strong growth in house prices in 2020 and 2021, the NHFIC estimated that a borrower who borrowed 95 per cent of the purchase price during the period would have reduced their loan-to-valuation ratio to around 70 per cent (with current market conditions, some of those gains are likely to be reversed).
The data show that first home buyers generally and HGS recipients continued to save after borrowing.