Banks and credit unions participating in the Morrison Government’s first home loan deposit scheme will have an opportunity to prune their waiting lists following the re-release of unused guarantees under the program.

Thousands of prospective first home buyers are waiting to secure financial support through the scheme following higher-than-expected demand during the COVID-19 crisis in the last year.

The scheme allows home buyers with only a 5 per cent deposit on a property purchase to skirt paying lender’s mortgage insurance by relying on guarantees provided by the National Housing Finance and Investment Corporation for up to 15 per cent of their loan.

Banking Day understands that lenders involved in the scheme were notified on Tuesday that 1800 unused guarantees were being re-released to participating lenders this week.

These “re-issued” guarantees are not in addition to the 10,000 the government made available last July but are a reallocation from intending home buyers who did not complete a property purchase.

More than 30 Australian banks participate in the scheme including NAB, CBA, Bendigo Bank, Teachers Mutual Bank, Auswide and CUA.

Burgeoning demand for support through the scheme could increase pressure on the government to expedite the release of another 10,000 guarantees that are currently earmarked for activation from 1 July.

Some lenders such as Teachers Mutual Bank notified brokers earlier this month they were no longer maintaining waiting lists nor accepting provisional loan applications tied to the first home loan deposit scheme until more NHFIC guarantees were released or reissued.